Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — SCOTLAND

Housing Waiting Lists

Sir David Steel: To ask the Secretary of State for Scotland if he will make a statement on current housing waiting lists held by local authorities in Scotland.

The Parliamentary Under-Secretary of State for Scotland (Lord James Douglas-Hamilton): Details of supplementary housing capital allocations to local authorities will be announced shortly. Those measures will be helpful in relieving pressure on waiting lists, although I have to say that housing waiting lists themselves are not always a reliable indicator of housing need.

Sir David Steel: Will the Minister acknowledge that my local authorities are not alone in reporting record waiting lists, since his own Scottish Office "Statistical Bulletin", which has just been published, shows that the number of applicants under the homeless category has increased by 133 per cent. in the past 10 years? Are those figures not an affront to the conscience of Scotland? Will the Minister recognise that last week's statement is equivalent to tinkering with the housing repair problems and that what is needed is to get the unemployed building workers cracking on a house building programme?

Lord James Douglas-Hamilton: I am delighted to be able to announce this afternoon that we are making available, this year, an additional £7·5 million to local authorities for projects to combat homelessness. Bids will be sought by 11 December and I plan to announce the distribution of those new resources before Christmas.
The right hon. Gentleman should remember that waiting lists are not the same as the homelessness application lists returned by local authorities. Households may be on the waiting list of more than one authority. Those lists include households that wish to be rehoused at some time in the future and may include households no longer seeking accommodation. However, the right hon. Gentleman's point about homelessness is well taken. We hope to have the bids for resources in from the local authorities very soon and we shall inform them about the £7·5 million allocation straight away.

Mr. Raymond S. Robertson: Does my hon. Friend agree that the Conservative Government need no lectures about out track record on Scottish housing given that, since 1979, home ownership in Scotland has risen from a paltry

35 per cent. to 52 per cent? Does he agree also that our fellow Scots should be congratulated on that achievement and not patronised, as they are, by the Opposition parties?

Lord James Douglas-Hamilton: Yes; what is more, the home ownership programme will be greatly increased through the rent-to-mortgage scheme, which we are introducing in the Housing and Urban Development Bill, which will give each tenant the right to take up that option.

Mr. McLeish: What about the homeless?

Lord James Douglas-Hamilton: The answer lies with the £7·5 million allocation, which will help particularly with specialised bids from local authorities. When we asked in the past for such special bids, they resulted in 1,800 accommodation units for the homeless in Scotland, which was welcomed by those who worked in housing.

Dr. Godman: How much of the £7·5 million will be allocated to Inverclyde district council? In Inverclyde, homelessness, that terrible social evil, is on the increase and many other housing problems bedevil or make miserable the lives of far, far too many of my constituents. I have asked the Minister over and over again to play the game by my constituents when it comes to housing.

Lord James Douglas-Hamilton: In the hon. Gentleman's district council and others, priority will be given to projects that aim to reduce the use of bed-and-breakfast accommodation for homeless people and help single-parent families. It goes without saying that the hon. Gentleman should ensure that all the relevant circumstances are put in the housing plan for his district authority because we shall announce provisional allocations for next year in due course.

Water Industry

Mr. Wilson: To ask the Secretary of State for Scotland if he will make a statement on the progress of his consultations about the future of the water industry in Scotland.

Mr. Wray: To ask the Secretary of State for Scotland what plans he has for privatising Scotland's water.

Mrs. Ray Michie: To ask the Secretary of State for Scotland if he is now in a position to announce his plans for the future of the water industry in Scotland.

Mr. Kirkwood: To ask the Secretary of State for Scotland when he expects to publish his consultation document on the future of the water industry in Scotland

The Secretary of State for Scotland (Mr. Ian Lang): I made a statement yesterday on the future of the water industry and have published a consultation paper.

Mr. Wilson: Does the Secretary of State recognise that the water industry has operated for more than 100 years in the public sector in Scotland without the need for recourse to domestic disconnections? Does he accept that we are a healthier and more socially just nation as a result of the absence of those powers? Will he give an undertaking today that, whatever the other considerations about whether water is privatised, he will not change the law as a result of that consultation to make it possible for poor


people to have their water disconnected, with all the consequences that flow from that, which we are already seeing in England and Wales?

Mr. Lang: I answered the hon. Gentleman's question yesterday. Disconnections do not affect the viability of the options laid out in the White Paper. The hon. Gentleman talked about the history of the water industry. Significantly, at the end of the second world war, there were more than 200 separate water authorities. It is only since 1946 that the Water (Scotland) Act has given general powers to local authorities in that matter. Gradually, the number of water authorities has been changed and the structure of the industry in Scotland has been reformed and modernised. We now face the need to make further changes and I hope that the hon. Gentleman will make a submission in response to the consultation paper.

Mr. Wray: Will the Secretary of State tell the House that the Government put no money into Strathclyde Water? Under section 94 of the Local Government (Scotland) Act 1973, it is given a borrowing limit of £83 million and the revenue comes from meter and water charges of £94 million. The total running cost of sewerage services in Strathclyde is £86 million, the water debt is £170 million and the total debt of sewerage and water is £417 million; that means that Scottish and British taxpayers pay £66 million a year. Has not the Secretary of State for Scotland the guts to ask the Government to do exactly the same as they have done in England and Wales, by wiping off £500 million? We want a tartan dowry in Scotland, like the green dowry in England and Wales.

Mr. Lang: The water and sewerage industries need capital for investment every year. The only time they were denied it was during the 1976–79 period of the last Labour Government, when water investment was cut by one third and sewerage capital investment was cut by half. Such vulnerability exposes the difficulty of relying on private sector funding when massive new capital investment of some £5 billion will be needed in the next 10 to 15 years. Does the hon. Gentleman think that that £5 billion should be taken from health, housing, roads, education or some other source, or will he look at the consultation paper and try to find a more positive approach to the problem?

Mrs. Michie: I do not think that the Secretary of State has answered that question. He is threatening the people of Scotland by implying that the capital debt will be written off only if water is privatised. Does that not amount to plain blackmail?

Mr. Lang: I do not know how the hon. Lady thinks that existing debt can be written off—it must be repaid. Although the industry needs some £600 million a year, roughly £400 million of that comes from revenues, and the remainder comes from capital. The capital expectations, which have doubled in the past four or five years, are anticipated to go on increasing in the next 10 to 15 years. That money must be found and I await the hon. Lady's submission in response to the consultation paper and her suggestions about where it can be found.

Mr. Kirkwood: On the issue of accountability, does not the Secretary of State accept that one of the unique qualities of the existing system is that local people have the ability and the opportunity to influence the priorities of their local water and sewerage services? Some of us are

concerned about the priority given to legislative standards enforced from on high. It is important that customers have a chance to influence what the water organisations do in their name. Will the Secretary of State give an assurance that whatever system is introduced, it will enshrine and retain that essential accountability?

Mr. Lang: The setting of standards to which the hon. Gentleman refers is something which should be done above local level—at national and European level. It is in order to meet those standards that we are inviting public consultation on the various options for the best way forward. The degree of accountability that can be derived from the options laid out in the consultation paper varies. I hope that the hon. Gentleman will send in a submission underlining that point.

Mr. Jenkin: I am an English Member of Parliament and my right hon. Friend will decide whether to privatise the industry in Scotland according to his consultation process—it is not so much a matter for me. However, should my right hon. Friend choose to privatise the industry, will he reassure the Scottish people that in England and Wales privatisation has led to a huge investment programme, a great improvement in water quality and improved conditions of employment for employees of the water industry?

Mr. Lang: I am grateful to my hon. Friend for telling us of his experience of the industry in England and Wales. During the 20 years to 1989, investment was below £6 billion and it is expected to be more than £28 billion over the next 10 years. That shows how the resources can be found in an imaginative way.

Mr. Adley: Without wishing to influence my right hon. Friend one way or the other—and I also declare an interest in the hotel business—may I ask him to look at that section of the legislation in England that affects infrastructure charges? Is he aware that an hotel in Leeds with which I have been associated for the past five to six years started off under the good offices of the Yorkshire water authority, which produced a quotation of £3,000 to attach the hotel to the mains? Now, the Yorkshire water company proposes to charge £208,000 for the same service. That fact does not need to influence my right hon. Friend's overall decision, but he should look carefully at the small print of anything that he introduces.

Mr. Lang: I am grateful to my hon. Friend for telling us of his personal experiences with the Leeds water authority. However, I must disappoint him, as I have no responsibilities for water in England or Wales.

Mr. John Marshall: When considering the possibility of privatising Scottish water services, as most Conservative Members wish my right hon. Friend to do, will he consider the experience of Thames Water, where there has been a 50 per cent. increase in investment and where water costs 45p per house per day—a reasonable charge? Does my right hon. Friend agree that the abolition of the drinking water directive would help the water industry throughout the United Kingdom?

Mr. Lang: I am grateful to my hon. Friend for telling us of the experiences of Thames Water. The drinking water directive and other European Community directives set


standards to which we want to aspire. The investment programme on which we in Scotland have embarked means that we intend to aspire to those standards.

Mr. Tom Clarke: In view of the Secretary of State's self-imposed confidentiality about the Quayle Munro report, will he tell us whether Quayle Munro is free to give advice to potential buyers and precisely what Quayle Munro said to him about disconnections?

Mr. Lang: The Quayle Munro report did not address issues such as disconnections, but dealt with matters such as the viability of a range of options, which are now laid out in the consultation paper. Whether Quayle Munro later becomes involved in giving advice to individual companies is a matter for Quayle Munro.

Doctors and Nurses

Mr. Burns: To ask the Secretary of State for Scotland how many doctors and nurses there were in Scotland in 1979 and at the latest available date; and if he will make a statement.

The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart): At 30 September 1979 there were 9,839 doctors, including general medical practitioners, employed in the national health service in Scotland and at 30 September 1991, the latest available date, this had risen to 11,079. The number of qualified nurses in the national health service in Scotland rose from 31,931 to 43,011 over this period.

Mr. Burns: I am grateful to my hon. Friend. Will he confirm that that shows an increase of just over 10 per cent. in the number of doctors and an increase of about a third in the number of nurses in the health service in Scotland? If my mathematics are correct, does he agree that they more than underline the Government's commitment not only to health care and patients in Scotland, but to the national health service throughout the nation?

Mr. Stewart: My hon. Friend is absolutely right. The figures are correct and beyond dispute, even by Opposition Members. They represent an increase of 12 per cent. in the number of doctors and an increase of 35 per cent. in the number of nurses since the Conservative party came to office. That underlines the Government's real commitment to the national health service and to its improvement in Scotland and throughout the rest of the United Kingdom.

Mr. McAvoy: Is the Minister aware of the threat to the employment of doctors and nurses and to services to the public by the threatened closure of hospitals in Glasgow, especially the Victoria infirmary and Rutherglen maternity hospital which serve my constituents? There will be a consultation period, but, as Mr. Laurence Peterken has displayed his absolute determination to close the Victoria infirmary and the maternity hospital, will the Minister ensure genuine consultation by removing Mr. Laurence Peterken from office for the period of that consultation?

Mr. Stewart: The hon. Gentleman, who is widely respected in the House, does himself no good by personal attacks on a distinguished servant of the national health service. The hon. Gentleman referred to the Victoria infirmary and will know that it serves my constituency as well as his. The Government welcome the production by

the Greater Glasgow health board of a consultation document in relation to changes in medical practice and changes in population. I assure the hon. Gentleman that there will be the fullest public consultation before any decisions are taken.

Mr. Kynoch: I am sure that my hon. Friend is aware that we are spending 44 per cent. more in real terms on the national health service in Scotland than was spent in 1979. I hope that my hon. Friend will take an interest in the review of acute services currently being carried out by Tayside health board and ensure that Stracathro hospital, the only major hospital between Dundee and Aberdeen for acute and emergency services, is retained. That hospital serves many of my constituents and those in neighbouring constituencies.

Mr. Stewart: As my hon. Friend may know, my right hon. Friend the Secretary of State may wish to consider a trust application from Stracathro hospital. He will also be aware of the immense success story of the Aberdeen Royal hospitals NHS trust, about which I could detain the House with details for some time. However, Madam Speaker would not wish me to do so. Undoubtedly, the success of the Aberdeen Royal hospitals NHS trust shows that trust status hospitals in Scotland are working well.

Mrs. Fyfe: It seems a little odd that the Minister has to be told that information in the Library shows that the true full-time equivalent increase in nurses and midwives is only 6 per cent. Is it not true that numbers have been increasing anyway since the health service was founded? I should like to ask about future funding for doctors and nurses. How many doctors and nurses will there be if five Glasgow hospitals are allowed to close'? How much income does the Minister expect to get from selling 82 acres at Stobhill or 10 acres at Victoria infirmary? How many patients will be refused treatment in his market system because the health board will not pay the costs?

Mr. Stewart: Oh dear, the hon. Lady does talk nonsense. However, I am glad to have a reassurance that even the hon. Lady—

Mrs. Fyfe: Read the statistics.

Mr. Stewart: I also go to the Library. I am glad to have the hon. Lady's reassurance that, however defined, the number of nurses in Scotland has increased under the Government, as has the number of doctors. I am glad that the Opposition have today conceded that, on any measure.
I am surprised that the hon. Lady does not think that there is a case for considering the future of acute services in Greater Glasgow. I should have thought that anyone looking at changes in medical practices and in population would concede that it was sensible to look at the options. We are moving from the stage at which we invested massively in district general hospitals in peripheral areas to a strategy of massive investment in district general hospitals in urban centres. I should have thought that the hon. Lady, representing Glasgow, Maryhill, would welcome that. [Interruption.]

Madam Speaker: Order. The House must come to order so as to hear the Minister. Has he finished his response?

Mr. Stewart: Yes, Madam Speaker.

Madam Speaker: In that case, I call Mr. Oppenheim.

Mr. Oppenheim: Does not this huge increase in the number of doctors and nurses in Scotland give the lie to the common Labour smear that we do not care about the health service? Is it not also the case that we have further committed ourselves to huge increases in NHS funding for this coming year, despite economic difficulties? Is that not in sharp contrast to the period when the Labour party was in power and got into economic difficulties, when the first thing that it cut was the hospital building programme?

Mr. Stewart: My hon. Friend is right. The Government's commitment is clear, and is shown by the figures. We are committed in broad terms to capital expenditure of £500 million over the next 10 years in the national health service in Scotland. As my hon. Friend rightly reminds Opposition Members, when the last Labour Government were in power, capital spending on the NHS was cut in real and in money terms. Under the Conservatives, it has increased and will continue to increase.

Training Provision (Autumn Statement)

Mr. Worthington: To ask the Secretary of State for Scotland if he will make a statement on the implications of the Chancellor's autumn statement for training provision in Scotland.

Mr. Stewart: Training provision for Scotland is one component of the figures for my right hon. Friend's overall programme that were announced as part of the autumn statement. It reflects a division of overall training provision for Great Britain, determined on the basis of relevant factors, such as relative unemployment. The marked improvement in Scotland's relative unemployment position since last year means that our share of overall training provision is smaller.

Mr. Worthington: In September, the Department of Employment let it be known that there was a shortfall of more than 9,500 training places for young people in Scotland, and there is a mounting level of long-term unemployment. Can the Government promise that when there is an allocation of resources to training, there will be an increase to meet that shortfall?

Mr. Stewart: I can give the hon. Gentleman the absolute assurance that in the past couple of days I have checked with Scottish Enterprise and Highlands and Islands Enterprise on the youth training guarantee. It is being met and will continue to be met.

Mr. Bill Walker: Will my hon. Friend confirm that, since 1979, the Government have increased the allocation of funds for training to thousands of millions of pounds, that additional training places have always been found to meet the requirements and that this is far in excess of anything ever achieved under any Labour Government?

Mr. Stewart: My hon. Friend is absolutely right. This Government are clearly committed to an effective training policy. It is output which matters, not input. Even on the measure of public expenditure to which Opposition Members pay such attention, in real terms this Government are spending two and a half times more on training than the last Labour Government.

Mr. McFall: Statistics on the youth training programme in Scotland show that at the end of the scheme

year, more than 60 per cent. of young people find themselves back on the dole. With the economic slump closing 200 Scottish firms every week, and unemployment having risen 30 months in succession and touching almost 250,000, what advice does the Minister have for those youngsters? They must feel, at that early age, that there is no future for them. They followed the Government's advice, underwent training, and now find themselves unemployed and worse off than before. Is it not the case that the autumn statement holds out nothing more than the bleakest of Christmases, and beyond, for Scotland's young?

Mr. Stewart: I am surprised that the hon. Gentleman undermines the effectiveness of the youth training scheme. No one suggests that everyone who undertakes training will automatically obtain employment at the end of it, but the Government's youth training guarantee for young people is given by no other European Community country.

Mr. McLeish: But it is not being honoured.

Mr. Stewart: My answer to the hon. Member for Fife, Central (Mr. McLeish) is that the guarantee is being met, though I know that he constantly issues press releases saying that it is not. I checked with Scottish Enterprise and Highlands and Islands Enterprise in the past couple of days that the youth guarantee is being met.

Housing

Mr. McAllion: To ask the Secretary of State for Scotland who he has met in the past year to discuss the supply of housing in Scotland.

Lord James Douglas-Hamilton: My right hon. Friend and I have frequent meetings with individuals and organisations involved in the provision, management and sale of housing in Scotland.

Mr. McAllion: Scotland faces a national housing crisis in terms of increased homelessness, which has risen 133 per cent. over the past 10 years, and the loss, over the same period, of 250,000 homes for rent. Does not the Minister understand that his recent spending announcements come nowhere near the sums required to meet the targets set by the Institute of Housing in Scotland of 15,000 new affordable homes for rent every year? Does he not comprehend either that people in Scotland with the most desperate housing need cannot afford owner occupation and rent-to-mortgage schemes? Most of all, they cannot afford the Minister's obsession with forcing tenure changes at the expense of the Government's failure to meet the demand for decent homes at an affordable rent.

Lord James Douglas-Hamilton: There is a large amount of activity in the hon. Gentleman's constituency. The Scottish Homes allocation in Dundee has increased from £10·9 million in 1991–92 to more than £15·8 million. As the hon. Gentleman will be the first to recognise, the remarkable transformation at Whitfield is continuing—as I know, having visited the Ormiston people's housing co-operative and Vale of Duntrune community housing association. The hon. Gentleman will welcome, as I do, the £70 million extra that will be made available to Scottish Homes' enabling programme as a result of the excellent settlement that my right hon. Friend the Secretary of State managed to obtain, which will increase the programme by


some £20 million in each of the next three years. I will bear in mind the hon. Gentleman's own district council's needs before we make provisional allocations.

Mr. Ian Bruce: Surely the hon. Member for Dundee, East (Mr. McFall), in his question, has done exactly the reverse—

Madam Speaker: Order. I am not seeking comments at Question Time. I must have questions, from all parts of the House.

Mr. Ian Bruce: Surely it needs to be said to people in all parts of the country, and particularly in Scotland, that they can afford to buy their own homes—and that by purchasing their council houses, 100 per cent. of the money raised can be spent on providing the new homes for which right hon. and hon. Members in all parts of the House seem to be asking.

Lord James Douglas-Hamilton: I agree. We know that 52 per cent. of Scots now own their homes, and that many more aspire to home ownership. I had the good fortune to visit the first rent-to-mortgage owner in Dundee, who works for the council. The scheme is welcomed by those who seek the right and the opportunity to own their homes, and it provides a new home ownership market which will be appreciated by those who cannot quite afford to exercise the right to buy.

Mr. Michael J. Martin: The Minister will know that there are some excellent sheltered housing complexes throughout Scotland, including my constituency. They provide high-quality housing for elderly people who are protected by wardens 24 hours a day. Why does not the Minister give more funds to the local authority, to Scottish Homes and to the housing associations, so that more good housing can be provided for our elderly people?

Lord James Douglas-Hamilton: The extra £20 million a year over the next three years which constitutes the extra enabling programme for Scottish Homes should allow more progress to be made in that regard. We shall bear Glasgow's needs very much in mind if any supplementary allocations are made, or else when the provisional allocations are made.

Green Belt

Mr. Galbraith: To ask the Secretary of State for Scotland what plans he has to protect the green belt.

The Parliamentary Under-Secretary of State for Scotland (Sir Hector Monro): My right hon. Friend's policy for protecting green belts is set out in Scottish development department circular 24/1985. Our consistent policy has been to maintain and enhance the green belt.

Mr. Galbraith: The Minister will know that much water authority land lies within the green belt. That land is much used and appreciated by my constituents in Strathkelvin and Bearsden. Will the Minister guarantee that, in the event of privatisation, no restrictions will be placed on access to the land, and, furthermore, that it will not be released for development so that private shareholders can rip off the public sector once again?

Sir Hector Monro: The hon. Gentleman makes a valid point. Most of our water resources come from land that is particularly attractive—the lochs and reservoirs—some of

which may include sites of special scientific interest. No concern should be felt about the future ownership of that land.

Water Industry

Mr. Welsh: To ask the Secretary of State for Scotland when he expects to publish the report by the consultants Quayle Munro on the future of water services in Scotland; and if he will make a statement.

Hon. Members: Answer the question.

Sir Hector Monro: It is a good answer, worth waiting for.
As part of the Government's review of water and sewerage services in Scotland, consultants were commissioned to give advice under conditions of commercial confidentiality for the purpose of informing policy. That advice is reflected in the consultation paper that my right hon. Friend published yesterday.

Mr. Welsh: Actually, that was not much of an answer.
Why have the Government allowed access to the local government report, but not to the water privatisation report? Have they something to hide? Surely, "commercial" sensitivities are in fact political sensitivities—the sensitivities of an isolated Government who are swimming against the tide of Scottish public opinion. Will the Minister confirm that the price of his secrecy is about £50,000, and will he now abandon this unwanted, unnecessary privatisation scheme?

Sir Hector Monro: Even after 24 hours' reflection, the hon. Gentleman is getting most of it wrong. Does he not understand that the document published yesterday by my right hon. Friend is a genuine consultation document? There are eight options, and variations may be produced in the intervening period. If Opposition Members put their minds to producing constructive reports for my right hon. Friend, they would be doing something really valuable for the Scottish people whom they represent.

Mr. Wallace: The Secretary of State said yesterday that he had engaged Quayle Munro to look into the technical aspects of water organisation. What technical qualifications—as opposed to financial qualifications—did Quayle Munro have? Do any of the commercial sensitivities relate to any French companies? Finally, is not the Secretary of State under a statutory duty, under section 1 of the Water (Scotland) Act 1980, to publish information relating to water services in Scotland? What is more fundamental than information that relates to the future organisation of those services?

Sir Hector Monro: I hope that the hon. Gentleman too has read the report which he has now had in his hands for 24 hours. Of course, the Quayle Munro report was valuable to my right hon. Friend for its technical and financial information. What the Secretary of State has published is a fair reflection of the position. It gives many alternatives. In fact, Opposition Members were all rumbled; they thought that it would be a privatisation document, and it is not. It gives alternatives which the country can consider. We will look at it carefully and come to conclusions later next year.

Mr. McLeish: Does the Minister accept that it is a scandal for a company that has access to confidential


information to be allowed to advise possible bidders in the privatisation process if the Government proceed with that crazy idea? Will he tell the House that the real reason for commissioning Quayle Munro was the cosy clique of Ministers and favoured consultants seeking private information about quotations and franchising, and had nothing to do with any of the other six options? Will he tell the House why his office is behaving in such a deplorable manner, abusing the taxpayers' money and the office of the Secretary of State? It is a scandal. When will the report be published so that we may know what is in it?

Sir Hector Monro: The hon. Gentleman should count up to eight rather than to 10 and he would realise that there is a great deal of valuable information in the report. [Interruption.] If the hon. Gentleman does not want to hear the answer, he need not listen. Quayle Munro was one of a number of companies that tendered for the consultation process. There was no question of a cosy operation; it was very competitive tendering.

Local Government

Mr. McKelvey: To ask the Secretary of State for Scotland if he will report progress on the consultations regarding future local government of Scotland.

Mr. Lang: I am very encouraged by the substantial public response to our second consultation paper on local government structure. More than 15,000 copies of the consultation paper and more than 70,000 shorter leaflets have been issued. The consultation period continues until the end of January next year.

Mr. McKelvey: The Secretary of State either forgot or deliberately did not mention subsidiarity. When he gets from the Prime Minister a definition of subsidiarity, will he relate with clarity to Charity McGarrity from Inverarity that she will not have subsidiarity, but that she, like the rest of Scotland, will have to remain in the mode of subserviarity? Does he realise that that breeds subversivarity? [Laughter.]

Mr. Lang: I am glad that the hon. Gentleman's question was greeted with hilarity by his colleagues. I must remind him that his original question was about the consultation paper on local government reform, but his supplementary had nothing to do with that. Nevertheless, I hope that he will read the consultation paper and let me have his thoughts ahead of our decision.

Sir Anthony Durant: Would my right hon. Friend care to comment on the press reports about the conduct of Monklands council which I understand is in the constituency of the Leader of the Opposition?

Mr. Lang: I do not think that I want to pry into that private grief. I am happy to leave that to the Leader of the Opposition and the shadow Secretary of State.

Scottish Enterprise

Mr. Salmond: To ask the Secretary of State for Scotland when he last met the chief executive of Scottish Enterprise to discuss the Scottish economy.

Mr. Lang: My ministerial colleagues and I often meet both the chairman and the chief executive of Scottish Enterprise to discuss a range of economic development

and training issues. I contacted the chairman this morning to inform him that as part of the package of special measures that I announced last week, Scottish Enterprise will receive an additional £6 million added to this year's budget and Highland and Islands Enterprise an additional £1·5 million.

Mr. Salmond: Does the Secretary of State remember the boast of his friend, party supporter and instigator of Scottish Enterprise, Bill Hughes, who said that the aim of the organisation was to eliminate Scottish unemployment? What time scale does the Secretary of State envisage for the achievement of that ambition, given that Scottish unemployment is rising remorselessly, that the modest aspects of recovery announced in the autumn statement were geared to the south-east of England and that it is widely reported that there will be substantial staffing cuts in the Scottish Enterprise training network? How can that combination lead to the elimination of Scottish unemployment, as promised by Bill Hughes?

Mr. Lang: The hon. Gentleman seems to have forgotten that Scottish Enterprise was the latter manifestation of the Scottish development agency, with its functions changed dramatically so as to prevent it being the acquisitive engine of nationalisation that it was under the Labour Government. Now it is an engine of economic regeneration and is doing its work extremely effectively both at its own hand and through the local enterprise companies all over Scotland. The hon. Gentleman will no doubt also like to know that in the package I intend to increase the allocation for the trunk roads programme by £8·5 million, for local authority roads projects by £5 million, for health service and social work capital programmes by £10·25 million and for the water and sewerage programme by £6·5 million. That commitment of resources will go directly towards improving Scotland's infrastructure and reducing unemployment.

Mr. Raymond S. Robertson: Will my right hon. Friend take this opportunity to reaffirm to the House—and when he does it will he do it slowly so that the hon. Member for Banff and Buchan (Mr. Salmond) takes it in—that gross domestic product, per head, in Scotland is currently at an all-time high and that male take-home pay in the hon. Gentleman's part of Scotland is the highest in Scotland? Will he further encourage the hon. Gentleman to stop talking Scotland down every time he gets the chance to do so?

Mr. Lang: My hon. Friend is absolutely right. As a result of the improvement in the underlying economic infrastructure in Scotland, it is significant that the unemployment rate in Scotland is lower now than it is in the south-east of England. Whereas a year ago it was 0·1 per cent. higher than in the United Kingdom as a whole, it is now 0·4 per cent. lower than in the United Kingdom as a whole.

Dr. Reid: Why does unemployment keep going up in Scotland, and who is to blame?

Mr. Lang: Unemployment is rising in Scotland, as it is rising elsewhere in the United Kingdom and in every industrialised country in the world, as a result of the world economic recession. However, what is significant is that unemployment levels in Scotland were, in June of this year, at broadly the same level as they were a year ago. Last


month, and the month before that, the headline unemployment total in Scotland fell. Last month, job vacancies in Scotland were up. The indications are that the Scottish economy is responding to the measures brought in by the Government, Scottish Enterprise and others in order to improve our competitiveness and help to create jobs.

Mr. Tom Clarke: Does the Secretary of State recall telling me last month that Scottish Enterprise had been set up in order to help the recovery of the Scottish economy? Since Scottish Enterprise is to lose jobs and since Scottish Enterprise knows that the effect of the autumn statement will be job losses all over the country, does the Secretary of State accept that he seems to be the only person in Scotland, given all these job losses, who thinks that Scotland is experiencing an economic recovery?

Mr. Lang: It is a pity that the hon. Gentleman should be so derisive of all the efforts of Scottish Enterprise and all the local enterprise companies in Scotland. Business men, with many preoccupations of their own, are lending their time and effort to help to generate employment and to improve the economic infrastructure and the environment. That is creating a climate in Scotland in which our unemployment figures are standing up so much better than they are elsewhere. The hon. Gentleman anticipates the future budget for Scottish Enterprise, but perhaps he ought to wait until it is allocated.

Governance

Mr. Galloway: To ask the Secretary of State for Scotland what further consideration he has given to the issue of improving the governance of Scotland; and if he will make a statement.

Mr. Lang: Our review of ways of making the government of Scotland more responsible to Scotland's needs within the Union is continuing.

Mr. Galloway: As my hon. Friends say, "Oh dear, oh dear." The Secretary of State has now been taking stock for 224 days. We have not had the merest whimper of an acknowledgment, that although he governs our country, 75 per cent. of our people voted against him. In Edinburgh on 12 December the Secretary of State, with his Cabinet colleagues, will be closeted with the European Heads of Government and grappling with them over the British Government's demand for subsidiarity, defined as the right of people to have local decisions taken as locally as possible. How can it be that it is right for this House of Commons and this British state to have subsidiarity when it is wrong for the people whom the Secretary of State misrepresents in this House and in the British Cabinet room?

Mr. Lang: I understand the hon. Gentleman's sense of frustration. After all, he laid out his own programme in July of this year when, Scotland United, an organisation which existed at the time, and to which he belonged called for
more extra-parliamentary work … a less reverential approach to Parliament itself; a shadow Scottish parliament meeting in Edinburgh; selective boycotts of set-piece parliamentary occasions like the now farcical Scottish Question Time; a greatly expanded Scottish Labour front

bench; and the planned disruption of strategically-selected Commons business No 'business as usual' until the Government comes to the negotiating table.
Plainly, as I look around me, Madam Speaker, I see that the hon. Gentleman's negotiations have not made much headway.

Mr. Bill Walker: Can my right hon. Friend confirm that in the taking-stock exercise, the Conservative and Unionist Government are not considering the flawed proposals put forward by the Labour party or the unworkable proposals put forward by the Scottish Convention? They would be bad for the Union, bad for the unitary Parliament and eventually very bad for the people of Scotland.

Mr. Lang: I am happy to reassure my hon. Friend that our proposals will do nothing to undermine the integrity of the United Kingdom or this sovereign Parliament, unlike the Opposition's proposals in the general election. I can also assure my hon. Friend that I and my right hon. Friend the Prime Minister continue to give the matter our close attention. We should welcome any constructive, positive and sensible suggestions from any quarter.

Mr. Trimble: In considering the future governance of Scotland, is the Secretary of State considering the introduction of safeguards against political and religious discrimination to avoid controversy such as that in Monklands district at the moment?

Mr. Lang: I would certainly deplore the discrimination to which the hon. Gentleman refers. I am not aware that the problem is widespread in Scotland and I would not anticipate our measures being directed towards that end.

Mrs. Ewing: When does the Secretary of State expect to end the stock-taking exercise and when will he make a statement to the House to advise all of us and the people of Scotland about the improvements he envisages in the government of Scotland?

Mr. Lang: I am grateful to the hon. Lady for her eager anticipation of the outcome of the deliberations. We shall make an announcement as soon as we sensibly can. I am sure that the hon. Lady agrees that it is more important to get it right than to get it quickly.

Hospitals (Argyll and Clyde)

Mrs. Adams: To ask the Secretary of State for Scotland when he next plans to meet the chairman of Argyll and Clyde health board to discuss the management of hospitals.

Mr. Stewart: My right hon. Friend the Secretary of State has no plans to meet the chairman of Argyll and Clyde health board at present, but my right hon. and noble Friend the Minister of State meets health board chairmen regularly.

Mrs. Adams: I was gravely concerned when I saw the Under-Secretary of State rising, because I knew that I would not get an answer to my question. Does the Minister accept that we are told that we have a listening Government who consult the people on the management of hospitals, on water privatisation and on the governance of Scotland? Will the Government give us one iota of


evidence of their having listened to the results of consultations and of their having implemented the results of those consultations?

Mr. Stewart: I gave the hon. Lady a completely accurate answer to her question. If she is asking about the consultation process in relation to the application for trust status by the Royal Alexandra hospital in Argyll and Clyde, I can assure her that my right hon. Friend will look carefully at all the evidence and arguments.

Mr. Graham: When the Secretary of State meets the chairman, will he consider testing properly the democratic rights of the people of Renfrewshire by giving them the opportunity to vote to see whether they accept our local hospital becoming a trust? I am sure that if a ballot were held, the Secretary of State would get the clear message from the people of Renfrewshire that they have no truck with the Tory trust.

Mr. Stewart: The hon. Gentleman expresses himself with his customary clarity on these matters. My right hon. Friend will consider the representations made in his customarily objective, well-reasoned and non-partisan way.

Scotch Whisky

Mr. Steen: To ask the Secretary of State for Scotland how many people were employed in Scotch whisky production in Scotland in each of the last five years.

Mr. Stewart: In 1987, 11,100 people were employed in plants whose principal product was Scotch whisky and which had 11 or more employees. The equivalent figure for the following four years was on average 10,300. I will give details in the Official Report.

The following is the information:



Number


1988
10,100


1989
10,000


1990
10,700


11991
10,400


1 Provisional.

Mr. Steen: I am sure that my hon. Friend the Minister is not too surprised about the fact that the amount of Scottish whisky consumed in the British Isles over the past few years has been declining dramatically. Does he agree that one reason for that is that the unit of alcohol in Scottish whisky is charged at double the rate per unit of alcohol in French, Italian, Spanish, or German wine? Bearing in mind the fact that the number of people employed in the Scottish whisky industry over the past 10 years has declined by 40 per cent., does he agree that our job in Britain is not to create jobs in Europe and France, but jobs in this country?

Hon. Members: Hear, hear.

Mr. Stewart: The reaction to my hon. Friend's question shows the popularity of his views on all sides of the House. As my hon. Friend will appreciate, taxation is a matter for my right hon. Friend the Chancellor of the Exchequer—[HON. MEMBERS: "Here he is."] I can now doubly reassure

my hon. Friend that my right hon. Friend the Chancellor of the Exchequer is fully informed of the views of the whisky producers on those matters.

Mr. Darling: Does the Minister accept that the Scottish whisky industry needs a constant supply of good quality, cheap water? If water is privatised and a private company has a monopoly, as is the case in respect of the supply of electricity, prices will rise and that will increase the price of whisky. In addition, there will be a constant threat of disconnection for the whisky industry as there is for ordinary members of the public. Does he not accept therefore, that the threat of the privatisation of water is a major threat to the future of the Scotch whisky industry?

Mr. Stewart: The hon. Gentleman is living in a fantasy world which is even more absurd than that inhabited by most of his hon. Friends. I do not think that that question requires a serious answer.

Sir Nicholas Fairbairn: Will my hon. Friend contemplate the fact that in order to achieve the glory of the Maastricht union, the French are willing to forgo drinking French wine and we should ensure that we drink our whisky and that they do not drink their wine?

Mr. Stewart: My hon. and learned Friend will no doubt be drinking a toast this evening to the extra £1 million that my right hon. Friend the Secretary of State announced for the Historic Buildings Council in his package this afternoon. With regard to my hon. and learned Friend's more general point, it is worth recording that the Scotch whisky industry was appreciative of the outcome which my right hon. Friend the Chancellor of the Exchequer achieved in discussions on the duty regime with his European colleagues earlier this year.

BCCI

Mr. Vaz: To ask the Secretary of State for Scotland if he will make a statement on what assistance he will give to local authorities that have lost money in the Bank of Credit and Commerce International.

Mr. Stewart: Two of the four Scottish authorities that had money deposited in BCCI applied for and were granted borrowing consent to enable them to cope with their losses.

Mr. Vaz: The Minister is no doubt aware that since those arrangements were entered into, the Bingham report has been published which severely criticises the role of the Bank of England. Those criticisms have been accepted by the Government and the Bank of England. Since the publication, the Bank has now decided to issue a health warning with its list of authorised institutions. Bearing in mind the fact that Scottish local authorities relied on that list and that there has been severe criticism, does the Minister agree that there is a compelling and overwhelming case for compensation to be paid to those local authorities? Is it not outrageous that Scottish poll tax payers and future council taxpayers have to pay for the mistakes of the Bank of England?

Mr. Stewart: I do not accept the hon. Gentleman's analysis. Only two Scottish authorities requested any assistance. My right hon. Friend the Secretary of State granted Western Isles islands council consent to borrow £24 million and Ross and Cromarty district council


consent to borrow £1·8 million to help those councils to cope with their losses. On the hon. Gentleman's other point, although the Bingham report makes a number of criticisms of the Bank of England in its supervision of the Bank of Credit and Commerce International, it makes it clear that prime responsibility for the losses rests with those who devised, directed and implemented the fraud.

Mr. Macdonald: But compensation was not within the remit of the Bingham inquiry, which leaves the Government as judge and jury of their own case. Does the Minister acknowledge that an independent verdict on compensation for local authorities and all depositors can come only from the Treasury and Civil Service Select Committee? Should the Select Committee come up with a

new report including a verdict on compensation, will the Government undertake to respect the findings of that report?

Mr. Stewart: Of course the Government will consider most seriously the recommendations of the Treasury and Civil Service Select Committee, as they consider seriously the recommendations of all Select Committees. I must repeat to the hon. Gentleman that, following representations from himself and from the Western Isles islands council, my right hon. Friend granted that council consent to borrow £24 million. As the hon. Gentleman knows, we have been sympathetic to the economic case that has been put forward by the Western Isles islands council in relation to the other aspects of the general programmes.

DSS Offices

Mr. Bill Michie: On a point of order, Madam Speaker. On 2 November, in answer to an oral question about the additional £8 million to local Department of Social Security offices, the Secretary of State for Social Security stated:
Details will be placed in the Library in due course."—[Official Report, 2 November 1992; Vol. 213, c. 1.]
Since that date, I have been asking the Library for that information, but unfortunately it is still not available. I have since found out that the local district offices are now in possession of that information. As late as today, I was told that it will be two weeks before the information will be available to right hon. and hon. Members. Surely that is just not good enough. It is embarrassing for us all. The matter shows that the Secretary of State and his staff are either incompetent or are treating the House with contempt.

Madam Speaker: I hope that Ministers on the Treasury Bench have noted the hon. Gentleman's points so that the matter can be looked at in order to ensure that documents which should be available outside the House are not denied to hon. Members inside.
We now come to the ballot for notices of motion. It would be most helpful if hon. Members would sign outside the Chamber and not at the last minute.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 4 DECEMBER 1992

Members successful in the ballot were:

Mr. Cyril D. Townsend
Mr. Kevin Barron
Mr. Malcolm Moss

Oath of Allegiance

Mrs. Teresa Gorman: I beg to move,
That leave be given to bring in a Bill to provide that persons seeking United Kingdom citizenship should be required to take an oath of allegiance to the Crown.
The present position of permanent residents in Britain is a mess and a muddle. Some of us are full citizens. Other people come from various parts of the world to work here as foreigners. Refugees come to take refuge here. People from many parts of the world come to Britain for other reasons. People are given the right to settle in Britain, and after five years that right becomes a right to live permanently in Britain.
Yet there is no obligation on the part of such people to accept the responsibilities of citizenship as well as the benefits. I know that the Labour party will give its knee-jerk reaction to the Bill, and assume that I am talking about race. I assure them that I am talking of nothing of the sort. My Bill is a cohesive measure which will make people who live here feel that being British means that they are part of the way of life and have a citizenship they enjoy, uphold and are prepared to defend if the necessity arises.
The oath of allegiance is set out in the British Nationality Act 1981. After five years of residence or, in the case of spouses of people who are already citizens, three years of residence, people can apply for full citizenship. However, there is no obligation on them to do so. I believe that that is wrong. It would have a cohesive effect on people to take an oath to the country.
The requirement to take an oath of allegiance is commonplace in other parts of the world. People who settle in America, Australia, Canada and New Zealand—all countries which are extremely generous in allowing newcomers into their society—require that most people, after an appropriate period, take an oath. In the United States, young children swear their oath and salute the flag every day of their school life. An oath makes them think that they are Americans or Australians first and that their country of origin comes second.
I should like all people who settle permanently in Britain to feel that they are British, just as those of us who were born and bred here do. Those of us who are native citizens affirm our citizenship and our dedication to Britain in special circumstances by taking an oath. Members of Parliament do so when they enter Parliament. Judges do so when they take up office. Members of the armed forces take an oath of allegiance. So do bishops in certain circumstances. Therefore, it is not an alien concept even for people who are already acknowledged citizens by birth to affirm their allegiance to Britain when they take up special duties.
In the European legislation which we are currently engaged in debating, we are informed about a new type of citizenship—a citizenship of the union. When I go round the country, I find that many constituents are worried about that type of citizenship. They want to know whether it will interfere with their British citizenship. They want to know how it will affect Britain if a great many people from Europe choose to settle in Britain permanently. Such people would benefit from being in Britain, yet would have no obligations to Britain, for example, in time of war or when questions of treason arise. They would have the benefits but not the obligations.
People in Britain would welcome the requirement that people who reside here permanently accept the obligations which go with that privilege. Therefore, I should like to introduce a Bill which will require those who decide to settle here permanently, as they are able to do after five years of being allowed to reside here, to make a commitment to the Crown, using the oath of allegiance set out in the British Nationality Act 1981. That will have a beneficial effect on our country. We know what happens to societies where people are drawn together under the name of one country, yet feel no allegiance to it. Those countries are fracturing and falling apart, and their people may even be involved in fratricide.
As Britain becomes more open to people from many parts of the world, including Europe, there needs to be a sense that the British nation has an identity—that being British means something to all those people, wherever they come from. By taking an oath, they would have to do no more than they would in other countries which exercise the same sort of generosity as Britain. I beg leave to introduce my Bill.

Several Hon. Members: rose—

Madam Speaker: Order. I understand that Mr. Tony Banks seeks to oppose.

Mr. Tony Banks: I wish to oppose the ten-minute rule application. The hon. Member for Billericay (Mrs. Gorman) is a feisty individual, who has espoused some worthwhile causes in her time, but this is not one of them.

Mr. Bob Cryer: Name one.

Mr. Banks: A woman's right to choose was one very good cause espoused by the hon. Member for Billericay.
I cannot support the measure, because it seems to be a regal variant of Lord Tebbit's cricket test. I oppose the Bill on a number of grounds. First, it is unnecessary. Existing citizens would not be required to take such an oath, as the hon. Lady rightly pointed out. If the Bill got on to the statute book, which it will not, it would create two classes of citizen and would add one further hurdle to the process of application for citizenship, which is already tedious, expensive and time-consuming.
When one thinks about it, the requirement to take an oath of allegiance is not onerous. I imagine that, if it were a requirement of citizenship to stand on one leg and sing a chorus of "My Old Man's a Dustman", most people would do so to secure their objective. Rather than create more obstacles to citizenship, the hon. Lady would do better to use her undoubted energies to propose a fairer and faster method of citizenship application.
Secondly, why should an oath of allegiance be restricted to the Crown? If we were going to insist on such a thing, it would be far more appropriate to take an oath of allegiance to the country. Most of the powers of the Crown, especially in respect of the royal prerogative, have long since passed to the Government of the day and to the Prime Minister—[HON. MEMBERS: "And to Brussels."]—yes, as my hon. Friends say, to Brussels. Perhaps we should take an oath of allegiance to Jacques Delors and the European Commission.
I realise that, since the Prime Minister has so many of the powers of the royal prerogative, it would be attractive

to Conservative Members if new citizens had to pledge allegiance to him. Before we move down that road, perhaps they should apply that test to Tory Back Benchers, especially in view of the impending debate on Maastricht, and start with the hon. Member for Billericay.
Finally, what about citizens who hold republican views? This country still passes for a free society, and it is not illegal to believe that, in a proper democracy, the Head of State should be elected and be accountable to the people. To hold such views should not be used as a way to call into question the patriotism of any citizen, new or old. With an oath of allegiance to the Crown alone, people with republican views would be forced either to break their oath or to disown their beliefs. That is an invidious choice, and it should not be imposed on any individual.
The hon. Member for Billericay said that MPs are required to swear such an oath before taking their seats after an election. I find that anachronistic. My allegiance is to the country and to the people who elected me, and to no one else. If oaths are to be taken, they should be to the country, to democracy, the rule of law, civil rights and the liberties of the people. Because the proposal in the Bill is restrictive in extent and limited in application, I beg leave to oppose it.

Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—

The House divided: Ayes 64, Noes 135.

Divison No. 89]
[3.44 pm


AYES


Ainsworth, Peter (East Surrey)
Knight, Mrs Angela (Erewash)


Alexander, Richard
Legg, Barry


Arnold, Jacques (Gravesham)
Lidington, David


Beggs, Roy
Maitland, Lady Olga


Biffen, Rt Hon John
Marlow, Tony


Blackburn, Dr John G.
Molyneaux, Rt Hon James


Bowden, Andrew
Neubert, Sir Michael


Boyson, Rt Hon Sir Rhodes
Nicholls, Patrick


Brandreth, Gyles
Pawsey, James


Cash, William
Porter, David (Waveney)


Clifton-Brown, Geoffrey
Powell, William (Corby)


Currie, Mrs Edwina (S D'by'ire)
Robathan, Andrew


Dickens, Geoffrey
Robertson, Raymond (Ab'd'n S)


Dover, Den
Ross, William (E Londonderry)


Duncan, Alan
Shaw, David (Dover)


Duncan-Smith, Iain
Shersby, Michael


Dunn, Bob
Sims, Roger


Evans, Nigel (Ribble Valley)
Smyth, Rev Martin (Belfast S)


Evans, Roger (Monmouth)
Spink, Dr Robert


Faber, David
Spring, Richard


Fabricant, Michael
Sproat, Iain


Forsythe, Clifford (Antrim S)
Stephen, Michael


Fry, Peter
Sykes, John


Gardiner, Sir George
Tapsell, Sir Peter


Gill, Christopher
Thomason, Roy


Gorman, Mrs Teresa
Townend, John (Bridlington)


Greenway, Harry (Ealing N)
Townsend, Cyril D. (Bexl'yh'th)


Hannam, Sir John
Trimble, David


Hawkins, Nick
Watts, John


Howell, Ralph (North Norfolk)
Whittingdale, John


Jenkin, Bernard



Jessel, Toby
Tellers for the Ayes:


Kilfedder, Sir James
Mr. Bill Walker and Mr. Nirj Joseph Deva.


Knapman, Roger





NOES


Adams, Mrs Irene
Bayley, Hugh


Ainger, Nick
Beckett, Margaret


Ainsworth, Robert (Cov'try NE)
Beith, Rt Hon A. J.


Allen, Graham
Bennett, Andrew F.


Armstrong, Hilary
Bermingham, Gerald


Austin-Walker, John
Berry, Dr. Roger


Banks, Tony (Newham NW)
Blunkett, David






Bray, Dr Jeremy
Lestor, Joan (Eccles)


Brown, Gordon (Dunfermline E)
Lewis, Terry


Brown, N. (N'c'tle upon Tyne E)
Livingstone, Ken


Bruce, Malcolm (Gordon)
Llwyd, Elfyn


Burden, Richard
Loyden, Eddie


Callaghan, Jim
McAllion, John


Campbell, Ronnie (Blyth V)
McAvoy, Thomas


Cann, Jamie
McCartney, Ian


Carlile, Alexander (Montgomry)
McKelvey, William


Clarke, Eric (Midlothian)
Madden, Max


Connarty, Michael
Mandelson, Peter


Cousins, Jim
Marek, Dr John


Cox, Tom
Marshall, David (Shettleston)


Cryer, Bob
Martin, Michael J. (Springburn)


Cummings, John
Michael, Alun


Cunningham, Jim (Covy SE)
Michie, Bill (Sheffield Heeley)


Darling, Alistair
Milburn, Alan


Davidson, Ian
Miller, Andrew


Davies, Bryan (Oldham C'tral)
Mitchell, Austin (Gt Grimsby)


Davies, Ron (Caerphilly)
Moonie, Dr Lewis


Dixon, Don
Morris, Rt Hon A. (Wy'nshawe)


Donohoe, Brian H.
Mullin, Chris


Dunnachie, Jimmy
Murphy, Paul


Enright, Derek
Oakes, Rt Hon Gordon


Fatchett, Derek
O'Neill, Martin


Faulds, Andrew
Pendry, Tom


Flynn, Paul
Pickthall, Colin


Fyfe, Maria
Pike, Peter L.


Galbraith, Sam
Powell, Ray (Ogmore)


Galloway, George
Prentice, Gordon (Pendle)


Gerrard, Neil
Purchase, Ken


Godman, Dr Norman A.
Quin, Ms Joyce


Gordon, Mildred
Radice, Giles


Graham, Thomas
Rooney, Terry


Griffiths, Nigel (Edinburgh S)
Ross, Ernie (Dundee W)


Gunnell, John
Salmond, Alex


Hain, Peter
Simpson, Alan


Hardy, Peter
Skinner, Dennis


Harman, Ms Harriet
Smith, Andrew (Oxford E)


Hill, Keith (Streatham)
Smith, C. (Isl'ton S & F'sbury)


Hinchliffe, David
Smith, Rt Hon John (M'kl'ds E)


Hoon, Geoffrey
Smith, Llew (Blaenau Gwent)


Howarth, George (Knowsley N)
Snape, Peter


Hughes, Kevin (Doncaster N)
Soley, Clive


Hughes, Robert (Aberdeen N)
Squire, Rachel (Dunfermline W)


Hughes, Roy (Newport E)
Steinberg, Gerry


Hutton, John
Stern, Michael


Illsley, Eric
Stevenson, George


Ingram, Adam
Strang, Dr. Gavin


Jackson, Helen (Shef'ld, H)
Taylor, Mrs Ann (Dewsbury)


Jamieson, David
Taylor, Matthew (Truro)


Janner, Greville
Watson, Mike


Jones, Barry (Alyn and D'side)
Wigley, Dafydd


Jones, Jon Owen (Cardiff C)
Williams, Alan W (Carmarthen)


Jones, Lynne (B'ham S O)
Wilson, Brian


Jones, Martyn (Clwyd, SW)
Winnick, David


Jones, Nigel (Cheltenham)
Wise, Audrey


Jones, Robert B. (W Hertfdshr)
Wray, Jimmy


Kennedy, Jane (Lpool Brdgn)



Khabra, Piara S.
Tellers for the Noes:


Kilfoyle, Peter
Mr. John Maxton and Mr. Keith Vaz.


Kirkwood, Archy



Leighton, Ron

Question accordingly negatived.

Autumn Statement

[Relevant documents: Minutes of Evidence taken before the Treasury and Civil Service Committee on 16th and 17th November (House of Commons Papers Nos. 250-iii and -iv)].

Madam Speaker: I have selected the amendment standing in the name of the Leader of the Opposition. Between the hours of 6 pm and 8 pm, I have imposed a 10-minute limit on speeches, and I ask other right hon. and hon. Members to exercise some voluntary restraint over the length of their speeches.

Mr. Adam Ingram: On a point of order, Madam Speaker. I understand that today the staff and unions at AE Technology were advised that the Government have decided to cancel the European fast reactor programme, to which Britain was committed to the tune of £12·87 million. Given that that announcement pre-empts the Government's review of their energy policy, which is on-going as a result of a resolution of the House, is it not out of order for the Government to act in such a way as to put at risk many hundreds of jobs in districts such as Dounreay in Scotland'?

Madam Speaker: I find it strange that hon. Members should raise points of order about such documents, which are not of a parliamentary nature, of which I have no knowledge and which I have not seen, and that a point of order which is out of order is used in order to raise the matter.

The Chancellor of the Exchequer (Mr. Norman Lamont): I beg to move,
That this House approves the Autumn Statement presented by Mr. Chancellor of the Exchequer on 12th November; welcomes the Government's continuing commitment to the firm control of public expenditure; supports the new expenditure plans, which honour the Government's commitments and provide protection of capital spending; applauds the specific measures the Government has taken to encourage confidence and foster recovery; and congratulates the Government on achieving a substantial reduction in underlying inflation, which has laid the foundations for sustainable growth.
I welcome the opportunity to have this early debate on the autumn statement. The principal aim of the measures that I announced was to restore confidence and to hasten recovery. To secure that objective I set out four key elements in the Government's strategy for growth: first, spending plans for the next three years which are fully consistent with what the economy can afford; secondly, within that tight overall settlement, special protection for programmes, particularly capital programmes, which strengthen the long-term health of the economy; thirdly, a substantial package of measures to boost activity in particular sectors of the economy; and fourthly, a further reduction in interest rates, following the dramatic progress that we have made in reducing inflation. That is the right strategy for Britain, and it has been warmly welcomed, not just by my right hon. and hon. Friends, but by industry and the country at large.
Conservative Members have never believed that the Government can spend their way out of recession. It is the private sector that generates growth and creates jobs—not the state. The hon. Member for Dunfermline, East (Mr. Brown) takes a different view. He believes—as he told a


recent press conference—that the state is what he calls the "engine of growth", a view that has been discredited and discarded right across the world. It is not even fashionable today in Albania.
What the Government can, and must, do is to create an environment in which businesses can plan, invest and succeed, and that is exactly what we have done. British business now has an underlying inflation rate below the European Community average, interest rates that are lower than anywhere else in the European Community, one of the lowest rates of corporation tax in the industrialised world, and the best industrial relations record that we have seen in this country for very many years. On top of all that, British exporters are now nearly 15 per cent. more competitive in foreign markets than they were just two months ago. That gives British industry massive new opportunities to win back markets both at home and abroad.
All too often, economic commentators—joined by Opposition Members—talk down the prospects for business and the outlook for the future. Well, in the months and weeks ahead, Conservative Members will be encouraging business men to seize the opportunities provided by the new environment. Low taxes, low inflation and low interest rates—that is what business has been asking for, and that is what it has got.

Mr. A. J. Beith: While that may be so, are there not two things that business men do not know? One is what will happen to the exchange rate, which they knew—or thought they knew—when we were in the ERM; the other is whether Britain will be in the single currency system or in the forefront of the development of the European Community.

Mr. Lamont: I have repeatedly made it clear that the Government are not operating an exchange rate target, that I believe in a strong currency, and that we will take the exchange rate into account in formulating our anti-inflation policy. The right hon. Gentleman asked about a single currency. We have always made it clear that a decision will be made at a later date. That is the right and appropriate course.

Mr. Peter Hain: In the light of the widespread view in business circles and elsewhere that the figures in the autumn statement do not add up, will the Chancellor confirm the briefing given to The Sunday Times by "senior Treasury and Downing street sources" that, come what may, the PSBR next year will be kept to 7 per cent.?

Mr. Lamont: I have no idea what the hon. Gentleman means when he says that the figures do not add up. They are set out clearly in the Grey Book. We have published what we believe is a realistic forecast for the PSBR for this year. We do not make a forecast for next year, but we have made an assumption. The PSBR for next year will be set at the right time, which is in the Budget. The hon. Gentleman is concerned about the PSBR, as I am. I should like to know what expenditure Labour intends to cut to bring the PSBR down. I hope that we shall not have any more such talk.

Mr. Gordon Brown: rose—

Mr. Lamont: I shall give way in a minute.
Economic activity is the product of millions of separate decisions by consumers, investors and business. They are

about whether to spend or to save, to invest today, or to wait until tomorrow. Confidence is the key to unlocking that activity, and Governments must do all they can to build and sustain it. That is why I introduced my package of measures in the autumn statement.
I am sorry that the hon. Member for Dunermline, East could not raise even half a cheer. However, I was not surprised, because for him every piece of good news is just another page that has to be ripped out of his speech. With his shopping lists and his grim sound bites, the hon. Gentleman likes to seize on a critical report, perhaps from the CBI, or a gloomy report, perhaps from the Institute of Directors.
I look forward to the hon. Gentleman's quotes in this debate from the CBI, which said that the package 
will rebuild industry's confidence in itself".
The chairman of the CBI's economic affairs committee said:
We needed a whole package of measures and that's what we got. The Chancellor has listened to what industry has said to him.
He said that that was what industry needed.

Mr. Brown: Will the right hon. Gentleman give way?

Mr. Lamont: I shall give way in a minute. I have given way twice.
The Association of British Chambers of Commerce said:
Businesses have heard the right messages".
The Institute of Directors said:
the Chancellor has given businesses the framework needed to begin the recovery.
Those are the views of the leading business organisations in this country. They speak for British business men and know what is actually happening in industry, and they have all endorsed the measures that I have taken.

Mr. Brown: Will the Chancellor also confirm that Mr. Howard Davies, the director-general of the CBI, said that no one could be sure that these measures are sufficient to take us out of recession? The Engineering Employers Federation said that they did not add up to a coherent strategy. Will the Chancellor look at his own figures and confirm that the autumn statement assumes, first, that unemployment will continue to rise; secondly, that it assumes in the budget to be awarded to the insolvency service that business bankruptcies will continue to rise? Will the right hon. Gentleman confirm that it also assumes that business investment will stagnate? Does that add up to the recovery that the right hon. Gentloman said he would give us?

Mr. Lamont: It was absolutely predictable that the hon. Gentleman would, as always, come out with his long shopping lists. He did not cite the most significant quotations from the largest, most important, and most representative business organisations. If the hon. Gentleman had quoted Howard Davies, the director-general of the CBI, in full, he would have said that Mr. Davies warmly welcomed my measures. To say that nothing can guarantee what happens in the next year is to say something that is true of all measures. There are no measures without risk and none with complete security attached to them. However, the package was warmly welcomed, and rightly so, throughout British industry.

Mr. Patrick Thompson: Will my right hon. Friend give way?

Mr. Lamont: No, because I should like to get on a little further.
My autumn statement was based on two fundamental principles—low inflation and tight control of public spending. Those are the key requirements for any lasting economic recovery, and they are the crucial conditions for the sustainable reduction in unemployment that all of us want to see. Opposition Members have never learnt those basic principles. They have never understood that inflation is the enemy of investment and saving, that reckless spending is the route to slump. That is why, in the past two years, we have fought a remorseless battle to get inflation down to the sort of levels that our European partners enjoy—levels that give our exporters the chance to compete abroad, and give consumers the confidence they need to spend rather than to save.
On Friday, we had some more excellent news on inflation. Underlying inflation is now down to just 3·8 per cent.—below the European Community average and the lowest for four years. The dramatic progress that we have made on inflation has allowed me to reduce interest rates since we left the ERM. More than anything else, that relaxation of monetary policy will help get Britain back to work. Interest rates are now at their lowest level for nearly 15 years; they are the lowest anywhere in the European Community, and they have fallen by a full 3 per cent. in the past eight weeks. That is a considerable injection of extra spending power in the economy—£45 a month off the typical mortgage payment, and over £3¾ billion off industry's interest bill. That comes on top of the interest rate reductions that we have seen continuously over the past year.
If we are to keep interest rates down, however, it is vital to maintain firm control over public spending. A prudent approach to spending is important for another reason, too—the more of a burden the state becomes, the less companies and individuals strive and prosper.
That means that we have to hold the growth in spending below the long-term growth level of the economy as a whole. That is why we decided to stick to cash plans for next year and to set tight ceilings for public spending for the following two years. Those ceilings are consistent with growth in the new control total of 1½ per cent. a year on average. Spending will grow in real terms each year, but the new system that I have put in place will ensure that we spend no more each year than the country can afford.

Mr. Dennis Skinner: We have heard about the CBI, and it always has a loud voice, and about the Institute of Directors, and it gets a fair showing in the House. However, the Chancellor fails to recognise that there are 4 million to 5 million low-paid people who he is demanding should have either a pay cut or a pay freeze. Their voice should be heard more often.
I have news for him. If he wants to balance the books, why does he not claw back, through taxation, the £26·2 billion that the richest 1 per cent. in Britain had in the first 10 years of the Tory Government? He should get that back, and then, instead of having a pay freeze for low-paid workers, he could use that money to finance the health service, to pay pensioners and to start building houses again. He should not be calling on low-paid people to clean up the mess created by the Tory Government.

Mr. Lamont: Perhaps I misheard the hon. Gentleman, but I thought that he began by saying something about

people with loud voices. No one would accuse him of not having a loud voice. He has what often goes with loud voices—a tendency to get his facts completely wrong. It is not true to say that low-paid people are exclusively or predominantly in the public sector. I am afraid that that does not accord with the facts.
In my Mansion house speech, I made clear that I was determined to protect capital wherever possible within this survey. I have done that in two ways: by giving priority within the new spending plans to capital programmes, and by liberalising the rules on private finance.
The new plans support capital projects across a wide range of programmes. We will invest £6·3 billion on roads in the next three years. That is what we promised at the election, and that is what we will do. We will invest more in British Rail next year than in any year in the 1980s. That means that investment is up by one fifth compared with 1979, even after inflation.
We will invest a record £2·1 billion next year on capital projects in the national health service in England; why do not Opposition Members even begin to welcome that? We shall more than fulfil our election pledge to provide 153,000 homes through the Housing Corporation over three years.
There will be hundreds of capital projects—almost 400 major projects in the NHS; £1·4 billion of channel tunnel-related projects; £170 million on new rolling stock for commuter services in Kent; and twice as many new road starts next year as this.
On top of all that, we have made provision to move ahead quickly with one of the biggest projects that London Transport has put forward for decades—the Jubilee line extension. That means more work for the construction and engineering industries—perhaps as many as 12,000 on one project alone.
Those plans and proposals ensure that, after a rise this year, total public sector investment will be maintained in the year ahead.

Mr. Richard Tracey: My right hon. Friend is truly to be congratulated on his spending announcements last week and today concerning the Jubilee line—which even Opposition Members must welcome. However, perhaps he will clarify one point that mystifies me. Following last week's statement, London Transport's chairman said the following day that he was aggrieved that core funding is to be cut over the next three years. What is that supposed to mean? My right hon. Friend announced good news for London Transport, so why does its chairman complain?

Mr. Lamont: Investment in London Underground will be at the highest level for 20 years since records began. Even taking out the Jubilee line—which is an extraordinary way of looking at things, as though it were not a major project that must be paid for—investment will be higher than in any year other than the current year. By any standards, that is a major injection of funds into London Underground.
Improving the nation's infrastructure is not just a job for the Government. The radical new approach to private finance that I announced last week will, for the first time, really open up infrastructure projects to the private sector.
I have abolished the need for comparison between private and public projects which used to prevent schemes going ahead. Provided a project is self-financing and


conforms with regulatory requirements, there is no reason, in my opinion, why the Government should stand in its way. I have opened the way to more joint ventures between the public and private sectors, and I have liberalised the rules for leasing, so the public sector can make the best use of the capital resources available.
As a start, British Rail will be allowed to lease some £150 million of new rolling stock in the next three years, which will help to develop the leasing market and pave the way to privatisation. That provision comes on top of BR's existing Government funding.
There are now immense opportunities across a wide range of projects. I listed some when I made my statement. The way is now clear for the private sector to come forward with further specific proposals for projects that they would like to carry out in partnership with the Government.
The Green Paper on motorway charging, which my right hon. Friend the Secretary of State for Transport will publish in the new year, will be another radical step. Road charging raises many difficult questions, which will need the most careful consideration, but a future decision to proceed with electronic road pricing would open up enormous opportunities for new private sector investment in Britain's roads network.
Of course, the best way of involving the private sector in capital projects is through privatisation directly. The Government have been following that policy for many years, and many successful private companies have been created as a result. Next year, the Government will hold another major sale in one of those companies, British Telecom. That will be done to promote further our policy of wider share ownership.

Mr. Alex Salmond: Does the Chancellor remember telling me on Thursday—this can be found in column 1009 of Hansard—that Scotland, or "the territories" as he put it, would gain more from the changes in the Barnett formula than it would otherwise have done? Given that the Scottish Office has since estimated the loss over the next three years at £27 million from this year's block allocation, would the Chancellor care to amend his remarks and bring them closer to reality?

Mr. Lamont: I do not believe that I told the hon. Gentleman anything that was incorrect, but I will have a look at what I said. I was explaining that the consequentials formula for Scotland had been adjusted in line with the results of the latest population census; that strikes me as sensible and, indeed, overdue.

Mr. Gordon Brown: Last week, the Chancellor said that he would recoup the £700 million from the car tax in further taxes for road users. Is he now telling us that his April Budget will feature that plan for all road users? If so, what form will it take?

Mr. Lamont: The hon. Gentleman would be amazed if I gave the full details; indeed, it would be amazing if I were able to do so. What I said was that the cost of the motor tax abolition would be recouped, and I think that it would be reasonable to expect—[Interruption.] I have not made up my mind about which part will be recouped from particular taxes.
Capital spending does not just mean more roads, more hospitals and more rolling stock. The Government have also been determined to invest in the future of our people:

that is why, in this very tight public spending round, we have continued to give priority to both education and health. Education spending will rise by 6 per cent. next year, and by 1995–96 it will be £l½ billion higher. That will allow 222,000 more students to enter further education; it will also allow Britain to rise nearer to the top of the international league for participation in education by 16-to-19-year-olds. At the same time, we are providing for a growing proportion of school leavers to take up youth training places.
Spending on the health service will rise in real terms in each of the next three years. Next year, it will rise by 3 per cent., enabling 2½ per cent. more patients to be treated. We have also kept the promises that we made to pensioners and to the less well off, who rely on benefits for their standard of living. That is why child benefit, pensions and other benefits have been indexed in full.
We could not have maintained capital spending, while at the same time focusing on health and education and uprating benefits, unless we had been prepared to adopt a firm stance on public sector pay. If we are to control current spending, the choice comes down to restraining the growth in wage bills or restraining the growth of services. In current circumstances, I judged that a policy of pay restraint in the public sector was the correct response.
I know that the limit of 1½ per cent. for settlements will seem hard to many who work in the public sector, but the facts must be recognised. In the past two years, earnings in the public sector have outstripped those in the private sector, where settlements are now at a 25-year low. Many private sector employees have experienced a pay freeze or a pay cut. I believe that a 1½ per cent. pay ceiling for one year is quite justified in the circumstances, given what it will yield.
The public sector pay bill represents an immense claim on the public finances. Controlling public spending is what we had to do, and what the autumn statement is all about.
I know all too well that the recession has been difficult for businesses and home owners, and particularly for those who have lost their jobs. More recently, the gloomy world background and the blow to confidence caused by the suspension of our ERM membership has raised renewed concern. But the fact is that, over the spring and into the summer, car production rose, being up 19 per cent. in the first half of the year, manufacturing production rose in the first and second quarters, and retail sales rose in the second quarter and again in the third.
Despite the gloomy headlines of the last few months, some of these hopeful indicators have been maintained. Car production again in October was 22 per cent. higher than a year earlier; industrial production rose in the third quarter; and today's new figures show that retail sales were up for the third month in a row, to their highest level for well over two years.
Over the months ahead, we need to see that this progress is consolidated and spread to those sectors, particularly housing and construction, which have been especially hard hit. It was to reviving confidence in those hard-pressed areas that the package of measures that I announced last week was addressed. Those measures, together with the cuts in interest rates, will provide major opportunities for businesses.
First, on the housing market, the Government are providing £750 million in the next four months to remove at least 20,000 empty properties off the market. The more private finance, and the better the terms, that can be


secured, the more such properties will come off the market. Housing associations will be looking to builders, building societies and the whole range of lending institutions to get involved. This measure has been warmly welcomed by all those who care about the housing market. The National Association of Estate Agents has already described the move as "a recipe for recovery".
Secondly, as to the construction industry, local authorities now have a one-off opportunity to spend all the receipts they get over the next year. That should boost capital investment by local councils by over £ 1¾ billion—extra money for house renovations or refurbishing schools. My right hon. Friend the Secretary of State for the Environment has taken steps to ensure that the extra investment is spread widely and has the maximum impact. Opposition Members were asking the other day why more could not be done. It can. They should go and tell Labour local authorities to sell their council houses and spend the money on the improvements we all want to see.
Thirdly, I have given exporters new opportunities to compete and succeed. I have increased export credit cover by £700 million for this year and next to help exporters take advantage of their new competitiveness and win new orders in world markets.
Fourthly, in regard to investment, with increased capital allowances and the lowest interest rates in Europe, every company has opportunities to invest. Even today, business investment accounts for a higher share of GDP than at any time during the 1970s. The higher capital allowances that I announced will add to this by giving firms the extra incentive they need to bring their investment plans forward.
Fifthly, the abolition of car tax will provide another major boost to Britain's car industry and to suppliers and component manufacturers throughout the country. That is why the Society of Motor Manufacturers and Traders said:
we can now look forward to the motor industry leading the economy out of recession".
British industry, which is the largest purchaser of cars produced in this country, will also benefit. The chairman of Lex Service, the car retailers, said that the abolition of car tax would
reinforce the improvement that has already been seen in the new car market in recent months".
As I have said, there have indeed been improvements in the car market in car sales and in car production.
Low interest rates, low inflation, a package to build confidence and recovery—those are the steps which we have taken to tackle unemployment. Governments beat unemployment by encouraging growth and creating the conditions which business needs to invest and prosper. Job creation is a consequence of economic recovery, not its cause. Unemployment cannot be solved simply by letting the state sector grow year by year, as Opposition Members seem to believe.
Indeed, because of their commitment to minimum wages, any Government formed by the Opposition would increase unemployment, not reduce it. That is not just my view. After the election, the hon. Member for Kingston upon Hull, East (Mr. Prescott) explained it all. He said:
I knew that the consequences were that there would be some shake out. Any silly fool knew that.

I repeat:
Any silly fool knew that.
Apparently not. No one would accuse the right hon. and learned Member for Monklands, East (Mr. Smith) of being a silly fool. However, it was the right hon. and learned Member who described Labour's minimum wage plan as
an unwavering commitment, not open to negotiation"—
even by any silly old fool. However, Labour's confusion over the minimum wage is nothing compared with the shambles of its tax plans.

Ms. Hilary Armstrong: How dare he?

Mr. Lamont: The hon. Lady shouts, "How dare he?" Does the hon. Lady mean, how dared we tell the British people at the time of the election, and was it not outrageous for us to do so?
Before the election, Labour's finely tuned, finely targeted answer to the recession was the biggest increase in taxes on incomes since the war. Since the election, the right hon. and learned Member for Monklands, East, has been unrepentant. He explained:
I strongly defend these proposals.
However, the hon. Member for Dunfermline, East takes a different view.

Mr. Gordon Brown: indicated dissent.

Mr. Lamont: He told a press conference last week:
Further tax increases at this time would be a mistake.
So who is right? Is it the leader of the Labour party, or is it the shadow Chancellor? Opposition Members will remember that there is only one way to settle this sort of dispute. They did it before the election and they can do it again: clear the diary; get on the phone; call in the journalists; book a table at Luigi's; and settle down to a bit of spaghetti diplomacy. The fact is that the Labour leader's tax plans have been buried by the hon. Member for Dunfermline, East. His shadow Budget, launched in such splendour and media hype, has been quietly, thank God, laid to rest.
However, Labour's problems will not go away that quickly. As usual, the Labour party's response to the outcome of the public spending round defies, as it always does, every known law of arithmetic. On pay, the hon. Member for Dunfermline, East believes that we have been too tough and he would like more. I should be surprised if he were to deny that. On capital spending, the hon. Gentleman says that we have not spent enough. Again, he would like more. However, when it comes to borrowing, the hon. Gentleman says that it is too high and should come down. On taxes, he says, "No, not today."
It does not even begin to add up. The hon. Member for Dunfermline, East does not know how much he would spend; he does not know how much he would tax; he does not know how much he would borrow. [Interruption.] We are not talking about next year's Budget. We are talking about the situation today and Labour's response to the plans that we have put forward.
When the hon. Member for Dunfermline, East was asked what was wrong with the Government's plans and what he was proposing, he replied:
I'm not prepared to put a figure on it.
He is the first shadow Chancellor to have volunteered for permanent purdah. This afternoon, we on this side, and the country, would like some answers. If the hon. Member


for Dunfermline, East wants higher public sector pay, where would he get the money from? Would he take it from patient care in the health service? Would he cut spending on schools? Would he axe the Jubilee line? Would he cancel the hospital building programme? That was the pattern followed by previous Labour Governments. These are the questions that the hon. Gentleman must answer when he seeks to make any points about the statement that I have presented to the House.
The autumn statement is about tight control of public spending, protecting capital programmes and encouraging recovery in key sectors. This party alone has the policies and the determination to achieve those goals. British industry now has its best opportunity in years to attack the markets of its competitors and show what it can do. Low inflation and a competitive pound, the lowest interest rates for nearly 15 years, time-limited tax measures, low rates of tax and good industrial relations all give Britain the edge as a place to invest and to do business.
Yes, we have been firm on public sector pay—firm so that we can build roads, so that we can build hospitals, so that more and more of our young people can have the education that they deserve. We have been firm on what we pay ourselves today so that we can build a more prosperous country for tomorrow.
Now is the time for business leaders and managers to make the most of these opportunities to invest, to ex port and to build for the future. They can do so in the knowledge that behind them are a Government investing record sums in the nation's infrastructure and in the nation's future.
That is why this statement has given an opportunity to every business man and has set the right course for this nation's spending priorities in the years ahead. It has been warmly welcomed across the country, and it deserves the wholehearted support of this House.

Mr. Gordon Brown: I beg to move, to leave out from 'House' to the end of the Question, and to add instead thereof:
'regrets that the Autumn Statement confirms that the recession is continuing and that unemployment and bankruptcies will continue to rise; regrets also that investment which has fallen substantially during the recession will fall again for 1992 and will at best, according to Government forecasts, rise by only one quarter of one per cent. during 1993; deplores the worsening balance of payments and the failure of the Government to recognise the need for a policy for manufacturing and for the regions; demands an emergency employment programme to reduce unemployment and the fear of unemployment and additional investment measures to boost the construction industry and business as a whole; and calls for a long-term industrial and training policy for Britain.'.
When unemployment is approaching 3 million, when long-term unemployment is almost 1 million and when investment is falling, I do not think that the House has heard such a complacent statement from a Chancellor as we have heard this afternoon. If the Chancellor is in any doubt about the problems that British industry faces, will he talk to the Government's own Insolvency Service?
In the autumn statement forecast, the Chancellor assumes a large increase in the budget of the Insolvency Service merely to deal with the problems of business bankruptcies over the next year. Does he agree that the number of bankruptcies—20,000—with which the service dealt two years ago will rise to more than 40,000 in the year

to come? Far from redundancies and bankruptcies falling as a result of the autumn statement, they will rise significantly.
Our argument is that last week's autumn statement and the measures that the Chancellor was forced to announce were an admission that his entire previous strategy had failed. He should apologise for three years of recession when measures that he is now being forced to consider were rejected and even ridiculed as unnecessary.
More important, the Chancellor should admit that the policies that he has explained this afternoon do not in any way measure up to the problems that we have at present. Most fundamentally of all—it became clearer and clearer as the Chancellor spoke—the Government still have no long-term industry or economic strategy for rebuilding the industrial base of this country.
The Government are unable to recognise that the fear of unemployment is the biggest barrier to the return of consumer confidence, so they have failed to introduce the employment measures that are urgently needed to bring down unemployment and to reduce the fear of unemployment.
The Government are unable to recognise that a complete policy shift and not just a series of ad hoc, piecemeal measures is necessary for industry. They have, therefore, failed to bring forward the industry strategy that is essential. The result is that the budget for the Department of National Heritage for the preservation of our past will soon surpass the budget of the Department of Trade and Industry for investment in our future. The Government are unable to distinguish between the cosmetic initiatives as a tactic and the real changes that are necessary to make Britain an economic world leader. That is why they have failed to provide a stable, long-term environment for industry.

Mr. John Townend: Does the hon. Gentleman accept that his criticisms of Government economic policy would be far more convincing if, last summer, when British industry was being squeezed by excessive interest rates and by an overvalued pound, especially against the dollar, he had joined some Conservative Members in urging the Government to leave the exchange rate mechanism, to float the pound, to reduce interest rates and to have the economic policy that the Chancellor is now putting forward?

Mr. Brown: Who was squeezing British industry? Who was responsible for the rise in interest rates? Who failed by not having an industrial policy for the country? Who was pushing up unemployment? It was none other than the Chancellor of the Exchequer.

Sir Peter Tapsell: Given that situation, why did the hon. Gentleman urge the Government to remain in the ERM up to the very last minute?

Mr. Brown: Our policy was not the devaluation of the pound; it became the policy of the Government. Let us be absolutely clear about what has happened over the past three years. The Government told us that they would stay in the exchange rate mechanism. They promised at the election that they would not devalue. I have the election manifesto in which they said that the exchange rate was the cornerstone of their anti-inflation policy. Who left the ERM and devalued? It was none other than the Chancellor.

Mr. Tony Marlow: Would the hon. Gentleman have left the ERM? If he had, would the pound have been devalued?

Mr. Brown: We have said to the Chancellor that he had the option of realigning within the exchange rate mechanism. The Chancellor has failed to give us a convincing answer. I ask him again today: was realignment discussed within the Government—yes or no? Was he not aware that if the Government had put that proposal to the authorities in Europe it would have had a sympathetic hearing? The answer to that is, of course, yes.

Mr. Rod Richards: The hon. Gentleman has just said, as many of his colleagues have said in the past, that the pound should have been realigned a week or two before 16 September. What should the central value of sterling have been at that time? What should have been the corresponding rate of interest?

Mr. Brown: The hon. Gentleman has the audacity to ask me, when the Government have devalued the pound by 15 per cent. The difference between us and the Government is that we believe in a managed exchange rate. The Chancellor cannot even tell us this afternoon whether he believes in a floating or managed exchange rate.
Let us be absolutely clear about the autumn statement. First, unemployment is going to rise and the Chancellor cannot deny that. Secondly, our industrial capacity will continue to shrink. Thirdly, we are bottom of the league in Europe for investment, employment, output and growth. Fourthly, the Chancellor's figures in the autumn statement admit that, even at the depths of the recession, the balance of payments of this country will worsen and import penetration, even as we fail to grow, will mean that foreign producers will benefit from any sales in the shops and more so than British industry.

Mr. Keith Mans: Will the hon. Gentleman give way?

Mr. Brown: I will give way only once more.

Mr. Mans: Does the hon. Gentleman agree with his colleague the shadow transport spokesman who said that any silly fool knows that minimum wages result in lost jobs?

Mr. Brown: The hon. Gentleman has taken the comments of my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) completely out of context. My hon. Friend was defending a minimum wage. He was not opposing it. He was saying that the abolition of wage control in the wages councils is completely unacceptable and would even have been offensive to Winston Churchill who brought them in. It is obscene that Conservative Members continue to tell us that there is no floor below which wages should not fall, while they have been absolutely silent when some executives in British industry have awarded themselves huge pay rises above £10,000 a week—[Interruption.]

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. While I fully appreciate from the Chair the advantage of interventions in debate, I will never tolerate a deliberate policy on either side of the House of shouting speakers down.

Mr. Brown: Thank you, Mr. Deputy Speaker. I do not know whether the interventions are voluntary or as a result of arm twisting on the Conservative Benches. However, I am happy to deal with Conservative Members whether they intervene from a desire to do so on their part or because of prodding from the Whips.
Let us consider the autumn statement. Last Thursday, Conservative Members not only cheered and waved their Order Papers; they stood and congratulated the Chancellor on his autumn statement. I can tell the Chancellor now that they were cheering his admission that the housing market would not recover of itself; that industry would not revive of itself unaided by the Government; and that investment would continue to decline without special measures. They were cheering the admission that simply waiting for free market forces to work was simply not enough.
When the Chancellor introduced the investment incentives that he himself once called phoney, which the Secretary of State for Trade and Industry before the election called vague and misplaced and which the Conservative election briefing called misdirected, and when the Government said that the use of capital receipts that the housing Minister once called fool's gold were acceptable forms of intervention in the marketplace, what we saw from Conservative Members was the belated and enforced admission of the failure of all that they had held most dear—the experiment of the 1980s in a free-for-all economy. That admission should lead them to apologise to the thousands of people who have lost their jobs, their homes and their businesses over three years of recession when the Government were, by their own admission now, pursuing the wrong policy.
Let us remember what happened at the election when the Prime Minister said not that a recovery programme was needed but that all that was needed was a Conservative election victory to bring about recovery. He said:
Our re-election will make recovery certain. Don't let anyone tell you that the recovery isn't there for the taking. The return of a Conservative Government is the remaining ingredient to ensure a return to growth.
In a speech called "Thumbs up for Recovery", he said: 
All Britain is waiting for is the confidence a Conservative victory will bring.
Such phrases show that the election was not so much about the representation of the people as about misrepresentation to the people about Conservative views. At the election, when the Prime Minister was asked about a recovery programme, he said:
£1 billion on a recovery programme"—
roughly what the Chancellor is giving in the recovery measures—
any economist will tell you that that will make no impact whatsoever.

Mr. Phillip Oppenheim: Will the hon. Gentleman give way?

Mr. Brown: I am not giving way.
The Prime Minister said:
It is sticking-plaster over the lack of policy. I have never heard such ludicrous nonsense in my life.

Mr. Oppenheim: Will the hon. Gentleman give way?

Mr. Brown: I am not giving way.
Last Thursday, we witnessed the final—

Mr. Lamont: rose—

Mr. Brown: Every time I give way to the right hon. Gentleman I have to remind him of the promises that he made in his party's manifesto that he was never able to fulfil.

Mr. Lamont: We all know what the hon. Gentleman was promising at the election—it was very large tax increases. If Labour had won the election, presumably the hon. Gentleman would have implemented those tax increases which he now thinks should not have been implemented. What has caused him to change his mind? Why is his view today different from what it was at the election?

Mr. Brown: I thought that it should have been obvious to the Chancellor that the recession has become a slump. British industry is faced with problems that it cannot of itself solve, and that is why the Chancellor has had to introduce a recovery programme.
Last Thursday we witnessed the final recognition of how wrong it was to say that the recession would end of itself and that recovery was inevitable and how wrong it was to assume a spontaneous free market end to the recession. Let us remember what the Chancellor said: he is reminding other people of what they said. In a speech on 27 June, 1990, as the recession began, he said:
The real test of Thatcherite economics is only now beginning. The slow-down in prospect will put to the test the new-found flexibility and resilience of the economy and the effectiveness of the labour market reforms. It looks as if we may now be seeing the beginning of a reverse of the long-running trend which has seen the share of manufacturing in GDP fall. I feel that the resurgence that we have seen so far is nothing like the resurgence that we are about to see.
That was the Chancellor speaking just before the recession finally got going. But the problem that the Government face is that, having had to admit that past policies have been wrong, and having had to admit, as they cheered, that the free market solution was insufficient, they have not in any way measured up to the scale of the problems that they themselves have created by their policies.

Mr. Michael Stephen: Will the hon. Gentleman give way?

Mr. Brown: I am not giving way.
As with the coal crisis, the Government are wrong and have been shown to be wrong. As with the coal crisis, they have modified their policies in the light of being shown to be wrong. But my fear is that, as with the coal crisis, they are doing the right thing belatedly, half-heartedly and with the continuing intention, as soon as circumstances allow, of reverting to their original destructive course of action.
Let us look at the scale of the problems that the Chancellor should have dealt with—the seventh quarter of recession, the longest recession since the 1930s, £30 billion lost output, unemployment rising for many months to come, manufacturing investment down 20 per cent., and business saying that industrial capacity is becoming so small that some people doubt whether in key sectors British industry will be able to benefit from recovery.
What do the Government's proposals achieve? Even if the Chancellor's forecasts were right, having lost 7 per cent. of our industrial output during the recession, he assumes that we can win only 1 per cent. of it back next year. Having lost 20 per cent. of our manufacturing investment, his proposals assume that we will recover none of that over the next year. Investment in our manufacturing future is 20 per cent. lower than when the

recession began—no wonder many people are doubting whether the autumn statement in any way measures up to the problems that we face.
If the Government's forecasts are right, we will reach a position by the end of 1993 when national income in recession-hit America will have risen by 4 per cent. since 1990, in Italy by 4 per cent., in Canada by 5 per cent., in Germany by 5 per cent., in Japan by 10 per cent., even in Greece by 8 per cent., and in Spain by 5 per cent., but will have fallen by 2·5 per cent. in Britain. That is the scale of our problems in comparison with other countries.
As everyone knows, the question is whether the test of the sincerity of the Chancellor's conversion from the failure of his previous policies can be seen in the actions that he proposes in the autumn statement. Let us look at what it adds up to in practice. We know that the Jubilee line, which was announced and then re-announced and which was in the election manifesto, has still to secure a starting date. We know also that many of the other projects that the right hon. Gentleman put before us last Thursday have no starting dates at all—for example, the proposals that were going to help us with new public-private partnerships for investment and the east-west crossrail which he mentioned in his autumn statement. Of course, that project was first announced in 1989, but construction cannot begin until 1 April 1996.
The central Scotland fast link that the right hon. Gentleman mentioned on Thursday—again, first announced not by him but several months ago—has an earliest possible starting date of 1996. The Birmingham west orbital road, again announced some time ago, has a first possible starting date of 1996. The channel tunnel rail link, which was announced in October 1989, has a first starting date of 1996. Perhaps the Government plan to help with the next Tory recession—they will make absolutely no difference to the current Tory recession, because not one truly new capital investment programme was announced last week for Scotland, Wales, Northern Ireland or the west of England.
It is not so much an autumn statement as an autumn restatement of projects that were previously announced and have been repackaged by the Chancellor. We must take into account the facts that transport expenditure is to be cut by 20 per cent. in real terms by 1996, that, as has been mentioned by a Conservative Member—the Chancellor did not deny it—London Underground financing will be in difficulties over the next few years, and that, whatever people say about the roads programme, the one thing that is absolutely certain is that roads that need urgent repairs will not be repaired. The promise of action is not for now, in the depth of the recession, but for a long time into the future.
Last week, Conservative Members were cheering not action now but the possibility that, at a later date if funds become available, things might be done long into the future—when we needed, in addition to the housing measures that the right hon. Gentleman announced, a home owners' rescue scheme and a direct boost to building houses, when we needed the construction industry to be directly assisted, when we needed the release of capital receipts that had been accumulated by the sales of the past, and not those receipts that local authorities do not even possess in most cases for the future and that are certainly likely to be far lower than the Chancellor's figures. People will see that the measures that the Chancellor announced


last week were limited, too little too late, and of course they will not deal with the substantial problems of homelessness.
Let us examine the Government's car industry initiatives. Some people might be excused for feeling a little cynical. The Chancellor looked at the problems facing 3 million unemployed, the financial difficulties of 5 million people on public sector pay who will have a pay cut, and the utter hardship of a quarter of a million people whose homes have been repossessed. He decided that, of all the measures that he proposed, the most generously funded would be the £400 off the price of the average new car. That measure could not bring joy to the unemployed miner or the underpaid home help who will receive an increase of at best £1·50 a week. As a result of the Government's policies, such people cannot even contemplate buying a second hand car, let alone a new car.
Let us examine the abolition of the car tax. I welcome it, but the measure has to be part of a full national recovery programme. The measure will cost the Treasury £750 million. The motor traders predict that, such is the recession in the economy, only 70,000 additional cars will be sold next year as a result of the initiative. That means that the cost to the Treasury of each additional car sold will be £10,500. Yet the average car costs less than £10,000. [Interruption.] It is absolutely right.
As the Chancellor has failed to contemplate additional measures to ensure industrial recovery and make it possible for people to afford to buy cars, it would have been cheaper to give cars away to 70,000 people. [Interruption.] Conservative Members may laugh but if 70,000 additional cars will be sold in the next year as a result of the expenditure of £750 million, it works out at almost £10,500 per car sold. The Chancellor would have been more sensible if he had spent the money on the first hand-out from the national lottery. That would have been a more sensible central element of his recovery programme.
The point that I make illustrates—[Interruption.] Conservative Members claim that they know how to add up, but the fact is that the measure costs £10,500 per car. Such is the false economics of isolated random and assorted measures. If they are not part of a co-ordinated recovery strategy—

Mr. David Shaw: On a point of order, Mr. Deputy Speaker. Have you had any request from the Opposition to lay a paper before the House which explains that if 70,000 additional cars are sold, additional moneys will be earned through VAT and—

Mr. Deputy Speaker: Order. That is a frivolous point of order and the hon. Gentleman knows it.

Mr. Quentin Davies: Will the hon. Gentleman give way?

Mr. Brown: No, I shall not give way. I have given way quite enough.
Conservative Members do not seem to understand that if the Chancellor does not introduce a full national recovery programme which includes investment, housing, industry and employment measures, the isolated measures that he takes will be costly and will not yield the benefit that he expects. The main point is that so long as people

are afraid of losing their job, and so long as the Chancellor fails to recognise that fact, an isolated gesture will achieve far less than it should. It becomes a huge cost which does not achieve great benefit for the country.
Let us summarise the net effect of the Chancellor's measures. He expects £300 million in additional investment in the next year. He expects investment to rise from slightly less than £71 billion to slightly more than £71 billion. He expects a 0·25 per cent. boost in investment. Let us examine the shortfall since the recession began. Investment has fallen from £80 billion to £71 billion—an 11 per cent. fall.
The best that the Chancellor can hope for as a result of his car tax and other measures in the next few months is that a £9,000 million fall in investment will be made up by only a £300 million increase. In other words, for every £100 in investment lost to the economy during the recession since 1990, only £3 will be put back in the next year. Investment will be a smaller share of the economy at the end of next year than at the beginning. Far from the investment-led recovery which the Chancellor argued that he would bring about, we have the opposite: Britain's share of investment in its economy will fall.
The problem is that, while the Chancellor admitted under pressure that he was wrong to pursue a wholly free market solution in the past few years, through lack of conviction he has failed to apply the remedies that we need. The first element that he should have considered was an industry policy for Britain. Germany, Italy, Japan and France are introducing programmes for manufacturing and technology. France and Italy are using this period to boost their computer and information technology industries. Japan has announced special measures for small businesses, technology and the new generation industries of the future. In Germany special action has been taken for engineering and technology. America is preparing to introduce an industry policy of its own.
Yet here in Britain, the Chancellor is happy to contemplate Britain producing fewer ships than Norway, Denmark or China, fewer cars than Spain, fewer commercial vehicles than South Korea, less steel than Brazil, fewer computers than Taiwan and a quarter of the machine tools that Germany produces. We import some of the most basic consumer goods which we could produce here. Is it right that the Government are prepared to preside over a massive cut in our industrial capacity? Worse than that, the autumn statement figures reveal that the Government propose to cut support for industry, technology, regional aid, small businesses and research and development.
The only budget increase of any significance at the Department of Trade and Industry is for the closure of coal mines. Yet the Government should build an energy policy that will make coal an essential element in our planning for the future.
The second element missing from the Chancellor's autumn statement is vital to the economic future of Britain. It is a long-term strategy for investment in people. We have fewer students at universities and colleges than Taiwan or Korea. The autumn statement admitted that, although there are more qualified people, only the same number of people could expect college places. Is not the net effect of the predictions in the autumn statement that training, which is central to our future, will be cut? The training and enterprise councils will have smaller budgets at a time when they have even greater need.
What does the Government's strategy add up to? We hear nothing now about zero inflation, nothing about the British economic miracle, nothing about the pound replacing the deutschmark as Europe's central currency and nothing about the first green shoots of spring which the Chancellor saw before. The Chancellor now tells us that he discounts forecasts. But for the past two years he has predicted month in month out that we will recover from recession.
What is the basis of the Government's economic strategy now? They have given up the medium-term financial strategy; they have given up shadowing the deutschmark; they have given up membership of the exchange rate mechanism. What does the policy now rest on? The Chancellor told the Treasury Select Committee that the economic policy rested on none of those strategies but simply on the Chancellor's judgment.
We have come through M0, M3 and sterling M3, the medium-term financial strategy and membership of the ERM. Now, after 13 years of experimentation and all the pain of it, we have the answer that economic policy, interest rate considerations and what happens to inflation must rest on the soundness of the Chancellor's judgment. "Lamont puts faith in judgment", as The Daily Telegraph put it on Friday 9 October. The Chancellor said:
My aim will be to reach a judgment on inflationary trends.
The Chancellor intends to build an economic strategy on the element which no one can claim is credible with the City or the country—the soundness of the Chancellor's judgment. He will bypass the relative certainties of astrology, reading the tea leaves, palmistry and cutting a pack of cards. The Chancellor's judgment is to be the central element of economic policy in Britain.
I suppose that each day, the Chancellor wakes up and reads the newspapers; he gets into his bath and sings, or not, as the case may be; he looks out of the window and sees, or does not see, the green shoots of spring; he hears, or does not hear, vague stirrings; and then he considers the economic issues of the day and what the judgment should be on inflation and interest rates. Every day is judgment day—the Chancellor's judgment—Norman's wisdom. That is the basis of economic policy—unsound before breakfast, unsound before lunch and unsound before dinner.
This is the Chancellor who told us that there would be no recession, and there was. He told us that there would be a recovery two years ago, six months ago, at the election, and after it. He told us that he would not devalue, and he did. He said that he would not leave the exchange rate mechanism, and he did. He told us that he would give us a new economic strategy, and now we find that it does not add up to much. That is the problem which the economy faces.

Mr. Lamont: Since the hon. Gentleman has talked about adding up, will he tell us precisely where he thinks the funds for all the programmes that he has put forward would come from? He told us that, although the 1988 to 1995 roads programme is to double, it is inadequate. He told us that, although London Underground's investment is to be the highest for 20 years, it is inadequate. He told us that the Department of Trade and Industry budget is inadequate, and that the budget for training is inadequate

even though it will increase next year. Can he tell us whether he is proposing to fund his programme by more borrowing, more taxes, or a combination of both?

Mr. Brown: The Chancellor does not understand that the public sector borrowing requirement is rising because of the recession and unemployment. Policies for growth will bring it down—[HON. MEMBERS: "Answer!"] I have set out a number of measures that the Chancellor could take. One includes a public dividend on the utilities that have made excess profits, which Conservative Members have defended, throughout the recession.
If the Chancellor could achieve proper growth in the economy, the cost of unemployment would fall and the investment that we would make in the economy would yield the necessary results.

Mr. Patrick Nicholls: Does the hon. Gentleman think that his projected tax on utilities will increase investment? Does he really believe that?

Mr. Brown: The hon. Gentleman does not seem to have considered the fact that the utilities have huge amounts of cash in the bank which they are not using productively in the economy. He does not seem to realise that during the past three years, when the Government have done little to regulate them, the utilities' profits have exceeded £20,000 million, which is roughly £800 for every family in the country. I shall ask him and his hon. Friends a question: do they believe that the utilities have made excess profits during the past three years? I do not think that anyone is in any doubt that that is what has happened.
My argument is that the country can have little confidence in the economic leadership of men and Ministers whose every prediction has failed and whose every promise has been broken. Having told us that a recovery programme was not necessary for recovery, they now tell us that it is a prerequisite. Having promised year-on-year tax cuts, which is what the Prime Minister did to win the election, they are saying that tax increases can neither be ruled in nor out. Having promised balanced budgets—initially annually, when the Prime Minister was Chancellor of the Exchequer, then over the trade cycle—they have redefined what they mean by a balanced budget. Because of the vast cost of unemployment arid recession, they have retreated to the assertion that the best that they can promise is to balance the budget in one or two years of the cycle.
Having told us that a pay policy in the public sector was inflexible and unnecessary—the Prime Minister said that specifically—and would mean recruitment and retention of staff difficulties and make it difficult to offer incentives, the Government now tell us that a pay policy that hits the poorest and weakest hardest is essential for the economy. Having been told that wage norms were unnecessary in a free market, two nights ago—when everyone expected a speech on foreign policy—we are now told that a wages policy is part of the economic policy for the private sector as well. Having promised a classless society, opportunity for all and a nation at ease with itself, the Government, by underfunding the health service, allowing waiting lists to rise and allowing huge increases in poverty, inequality, deprivation and homelessness, have reneged on any promise that opportunity for all was ever possible under such a Government.
What is at stake is not merely the Chancellor's personal fate—that has long since been decided—or the political


fate of the Conservative party. What worries me is the economic fate of millions of people who cannot depend on any consistency in economic policy while the Conservative party is in power. How can people spend with confidence or plan ahead? How can people move home? How can businesses invest when they do not know from week to week what Government policy will be and whether they will have the guts to stick with it? That is why it is the Government who have become the obstacle to economic recovery; people do not have any confidence in them.
The Conservative party is fond of comparing everything to what happens in business. Let it be clear that if the senior executives of any company had been responsible for the Government's mistakes; if they had consistently misrepresented the true state of their finances; if they had recklessly entered into promises that they were never able to keep; if they had published a series of false prospectuses and said that they stood wholeheartedly behind them and would not change; if they had lost billions off the reserves in a few days as a result of speculation; if they had presided over the rundown of core manufacturing activities, with more goods having to be imported from abroad; if they had to say that all past statements that they had made were virtually inoperative, as the Government did on 16 September; and if they had been found responsible for errors and misjudgments on the scale that the Government have made them, would there not have been a boardroom coup? Would not those people intimately associated with the company have demanded big changes and resignations? Would not those executives have resigned as the error of their ways had been exposed?
The Government's philosophy seems to be to make excuses and stay. The Government have been forced by events to admit that they have been habitually wrong on a massive scale for a long time. Yet even now they cannot get it right. The Chancellor says that he is going for growth. He should be going now, so that growth can succeed.

Mr. John Biffen: I always enjoy the speeches of the hon. Member for Dunfermline, East (Mr. Brown). He has all the fervour and moral zeal of the manse, and that was evident this afternoon. I confess that I bring different qualities to the debate—philosophic doubt and general agnosticism.
I am anxious for those who believe that one can handle the components of spending, income, and borrowing as though they were mechanical levers which can produce a predetermined end to the recession. If we look across the western world—in particular, this week, at Germany—we find other economies, with different economic philosophies, thrust into the miserable experiences that we enjoy. In that context, I congratulate my right hon. Friend the Chancellor on the reception that his autumn statement received within the Conservative party—because it was an important component in the restoration of confidence—and in the business community. I hope that the confidence shown can be vindicated.
My enthusiasm centred around the decision which preceded the autumn statement to allow our exchange rate to find a more realistic level. It is now 15 per cent. below its ERM rate. For all those people who talked about a managed devaluation, especially the Opposition Front

Bench, were any of them thinking of managing it to the level that has proved to be the economic reality? No. They would have chosen a lesser figure. It could have been managed initially at that level but speculation would have recommenced after a short time. I am delighted that we now have that particular freedom and the consequent lower interest rates. I wish my right hon. Friend well in the pursuit of those policies, because I believe that the more we expose ourselves to underlying and prudent reality in the economy, the more likely we are able to trace our steps back to a happier economic situation.
I must tell my right hon. Friend that that marks the end of those of my words which will come gladly to him. What I say hereafter he may well support in his bosom, but I suspect that he might feel that there are other occasions when they could be said more appropriately. I happen to think, however, that one's job in the House of Commons is to offer good-natured advice and that I will now do.
I shall concentrate my remarks on three matters: borrowing, incomes policy—I prefer to identify it by what can be familiarly understood—and taxation. My right hon. Friend has, understandably, pursued a high level of public spending. I welcome the figures contained in the statement, particularly in terms of the protective areas of state activity such as health, education and social services. Of course, as a consequence, public borrowing is now at substantial levels—£37 billion for the year 1992–93, or 6¼per cent. of the gross domestic product. I do not dismiss the Financial Times or The Daily Telegraph as the more radical elements of the press and they have calculated that, in the following year, public borrowing could rise to between £44 billion and £45 billion, or between 7 and 7¼ per cent. of GDP.
For those who just have a sense of history, I remind them that the last time that we had a PSBR higher than that was in 1975–76, back in the territory of the International Monetary Fund and Mr. Witteveen. Those hallowed memories inevitably diminish over time and it is just as well that we remind ourselves of them.
The figures for public borrowing are quite formidable and the point must be made—not least in the context that we are all concentrating our minds upon Maastricht—that in article 104C—I put in a detailed reference for the benefit of my right hon. and learned Friend the Home Secretary—the borrowing threshold for excessive deficit is triggered at 3 per cent.
My right hon. Friend the Chancellor needs no reminding that we provide the shock troops who seek to serve him. The public borrowing figures represent a potential future inflationary timebomb. The recovery may come unexpectedly fast; the truth is that none of us knows about the timing of that recovery. The confident assertions that seem to be the stock-in-trade of economic debate not merely in the House of Commons but outside is extremely depressing. We cannot prudently contemplate borrowing of that magnitude without realising that, even with a modest recovery, there may be great difficulties in funding that borrowing other than in an inflationary fashion. We would then be back on another treadmill, having just escaped from one.
In that context, I should like to consider incomes policy. Given the current level of public borrowing, the Government, quite naturally, wish to minimise their spending and in as painless a way as possible. So a formula has been developed, a crude 1½ per cent. across the board limit on pay increases in the public sector, just for one year.
I am not going to be so hypersensitive as to cavil about the circumstances that persuaded the Chancellor to make that judgment, but other considerations should be put on the scales.
For a long time we have been trying to disaggregate the public sector through the operation of performance pay and a host of other techniques to try to bring about a much more open system of payment. We persuaded ourselves that that was a prime requirement. Let there be no misunderstanding: to go for the flat rate approach will make that objective a good deal more difficult. I suspect, however, that that approach will still persist, which will make the actual implementation of the 1½ per cent. limit more and more partial and will therefore give rise to more and more resentment. I say that not looking into the crystal, but merely reading the book of the 1960s, when we went through all this.
One may start with the hope that the decision is a rather clever wheeze to keep public spending under better control than would otherwise be the case, but it begins to get out of hand. We have already seen how the private sector is being invited to take part in this great exercise. The Prime Minister wheeled out his wayside pulpit and took it down to Mansion house where he gave a little lecture about the 1½ per cent. limit to the private sector. If wealth creation means anything, it means striving. It means rewards for the successful. Those efforts should not merely be disparaged by ministerial rhetoric—for it is no more than that. As for the weekend lectures, the language of senior Government politicians is far too valuable to be squandered on that kind of exercise because it merely devalues their general currency.
Given that I have an anxiety about the level of borrowing and that I do not believe that one can have restraints on the public sector in the form of a 1½ per cent. pay settlement—certainly not beyond one year—which is now being promulgated, it is important to consider the debate in the global sense. I started my speech by referring to what has happened to other countries in the western world. I do not think that President Bush did himself or the United States that much good when he said, "Watch these lips, no more taxes". I do not think that Kohl did himself much good by foreswearing the use of taxation to deal with the unification of Germany and rather to depend heavily on monetary weapons. We have to be prepared to see increases in taxes in the coming Budget as complementary to what is now being elaborated in the Government's spending and borrowing programmes.
I am not for one moment going to suggest what kind of taxes are appropriate, but I believe that it would be better to devise a tax system that bore upon people as they spent rather than as they earned. In that way we will gradually downgrade the impact of so many of the items that are set against tax liability, which has bedevilled a good deal of tax planning and tax management.
I do not believe that the policy to get a measured and I hope successful emergence of Britain from the miseries of the recession can possibly succeed unless all the major elements of policy have some realistic relationship with each other. In that context I believe that taxation has a part to play, and that comes not happily from my lips when I say that it must mean an increase in taxes.

Mr. A. J. Beith: The right hon. Member for Shropshire, North (Mr. Biffen) has given the Chancellor much food for thought. I want to draw attention to something that he said at the beginning of his speech, when he referred to the reception that the autumn statement got from those on the Government Back Benches.
That reception was indeed a warm and enthusiastic one, but it seems to have faded a little. However, the point is that the Chancellor should not look to his Back Benchers to assess the value of his policies. The fact that he has a great need to do just that because of recent events, and the fact that those who delivered that reception have, primarily, short-term considerations because of recent events, are bad pointers for economic policy. The pursuit of an economic policy based on judgment will not be assisted if the test of that judgment on the day is how pleased the people sitting behind the Chancellor are. I hope that he will bear that in mind in the future.
First, I wish to enter a complaint that we are having this debate so soon after the autumn statement. Our normal practice has been to give the Treasury Select Committee time to prepare a report and take evidence. The Chancellor and the Chief Secretary have made it their business to come along to the Committee during the short interval, but there has not been enough time for hon. Members to study the contents of the autumn statement, which makes me suspicious that the Government did not want us to have time to consider the details before this debate.
Usually, the statement, together with an avalanche of press releases from Departments, can bear a different interpretation when studied more closely. Even Conservative Governments juggle and emphasise the figures in order to give the impression that they are spending more new money than they really are. It is sometimes surprising that Conservative Governments should want to give that impression. Time to study the detail is necessary.
Time is also needed for the Secretary of State for the Environment's statement on what will happen to local government finance and what the standard spending assessments will be. The Government clearly promised that this year the same mistake would not be made. We were told that the Secretary of State for the Environment would probably make his statement by the end of October, and that we would be able to consider in this debate not only central Government but local government finance. We are being denied that opportunity, because that statement has not yet been made.
When the figures are studied in more detail, they become interesting. For example, the Government seek to argue that they have done well in protecting the overseas aid budget, but the figures are constant for the two years after next year, at £1·9 billion, which implies a real cut of 6 per cent. over those years using the autumn statement's assumptions on inflation—the GDP deflator.
The increase in overseas aid to take place in the coming year is effectively dedicated to aid to eastern Europe. I strongly support helping eastern European democracies and economies to develop, but the Government have always asserted that that would not be done at the expense of aid to developing countries. Therefore, the figures for aid to developing countries turn out to be less rosy than the Government suggest.
Transport expenditure had a significant boost in the spending plans that were already in place, but it becomes apparent that there is not really a further increase. The extra money for British Rail next year—£130 million—buys only the new Networker trains promised before the election. The extra £100 million for 1994–95 is only for channel tunnel expenditure.
London Underground is complaining vociferously about the effect of the Government's plans for it, because, although the Jubilee line is in—despite not yet having been finally agreed—modernisation of the Northern line goes out as a consequence. None of the key projects that British Rail has planned, from modernisation of the north-west line to smaller routine maintenance projects or further electrification, finds a place.
The Government have said that they are protecting existing capital expenditure. To that extent, they have been clear about what they have done for most of the time. We argue that additional capital expenditure is needed if this is to be the route to economic recovery. I think that the Government feel that, by protecting capital expenditure, they have assisted the dash for growth, to which the Prime Minister referred in his recent remarks. If it is to be a dash for growth, it will require additional capital spending.
One of the most confusing areas is local authority capital spending.

Mr. Stephen Milligan: Will the right hon. Gentleman repair the omission by the hon. Member for Dunfermline, East (Mr. Brown)—he would not answer the question put by my right hon. Friend the Chancellor—as it appears that the Liberal Democrats, too, would like to see much more spending in those areas? If the right hon. Gentleman favours more spending on capital projects, would he pay for it by cutting current spending on, say, pensions or would he raise taxes?

Mr. Beith: I shall come to financing before the end of my speech, if the hon. Gentleman will wait that long. I shall not make the same mistake as Labour Members in not saying how they propose to finance their suggestions—or, to be fairer to them, by having a smaller programme of additional expenditure than some of their rhetoric suggests. That would be a fairer criticism, and that is what the Chancellor said.
The Government have chosen to allow local authorities to increase their capital spending on the basis of the sales of capital which they undertake from now on. They have closed off the route of using previous sales of assets for that purpose. Their argument for doing that is that they do not want to reward local authorities that hung on to money and failed to repay debt.
When pressed, as Ministers were before the Treasury Select Committee, to explain how local authorities would achieve those sales in a depressed market, Ministers said that it was all right, because some local authorities had dragged their feet over council house sales. So the authorities that will be able to spend—those that will be rewarded—are those that have dragged their feet over council house sales. I do not see the logic of that. What sense does it make as an incentive?
An even more perverse incentive—to use the Chief Secretary's phrase—is to tell local authorities to go out now and achieve sales of assets, when the market is in its

worst possible condition, when the price achievable will be the worst possible, when the effect on the market for everybody else will be as bad as it can be and when they will be unable to start their capital projects until they have achieved those sales. There can be no rapid or early action, because local authorities cannot undertake that capital expenditure until they have carried out the sales.

Mr. John Watts: Rewarding local authorities is one of the arguments that my right hon. Friend the Chief Secretary used, but there was a more fundamental one, which the hon. Gentleman will acknowledge. The total of Government borrowing as a proportion of GDP is an important economic factor.
Being committed to Maastricht, the right hon. Gentleman would not wish to see the British economy diverge too far from those criteria. Does he not accept that there is a fundamental difference between releasing past receipts that are currently treated as reducing growth borrowing to get to the net figure of general Government indebtedness, which adds to total borrowing, and allowing the full use of future receipts, which are self-financing? When a local authority sells an asset and receives funds from the private sector, there is no net additional Government borrowing.

Mr. Beith: If the hon. Gentleman is right, capital expenditure by local authorities on a self-financing basis would have been acceptable had the Government allowed it before now, so I do not understand how the hon. Gentleman can advance that argument. The question is simply how much of it we think that the economy can stand. The Government think that the economy can stand £1·8 billion of it over three and a half years, and prefer to see it financed from new asset sales. I doubt whether that figure will be achieved, because local authorities will be unable to achieve those sales, particularly in the earlier part of the period, when it is most necessary for the capital expenditure to take place.
I do not need to dwell on the needs that that capital expenditure could meet in terms of housing, school repairs and other improvements to the stock of things that help the community and industry. There is considerable doubt whether the Government's objective of increasing capital spending by local authorities will be met.
The Chancellor has taken a significant change in direction on fiscal measures. He used to be opposed to fiscal fine tuning and any measures that smacked of that. He has now accepted that changes in car tax and capital allowances, housing market intervention and the spending of capital receipts are desirable, although he found them undesirable earlier in the year.
A number of those measures are welcome, but they do not add up to much. If the Chancellor has accepted the case for fiscal stimulus, why does he not do the job properly, instead of stinting on capital receipts and making no additional funds available? The reflationary impact of his small fiscal package may be more than offset by the deflationary impact of public sector pay curbs.
The right hon. Member for Shropshire, North mentioned incomes policy. It is a confused area. In the public sector, there is to be a 1·5 per cent. ceiling, although that does not mean that no individual will get more than 1·5 per cent.—it would not be possible under the


increasingly decentralised mechanism. It is supposed to mean that no Department or major area of activity could achieve more than 1·5 per cent.
What is to happen in the private sector? According to the Prime Minister, the private sector must take note and respond, but the Treasury forecasts for the economy assume higher real personal disposable incomes of about 1·5 per cent., while the public sector is expected to suffer a cut in real incomes. What is the Prime Minister saying to the private sector? Is he saying, "Don't achieve an increase in real disposable incomes or our recovery plans will not work"? That seems to be the Government's dilemma.
If the private sector does not receive a substantial increase in real incomes, the money will not be available in the form of spending power to bring about recovery. It is possible that some of that money, if not paid in wages, might be paid in industrial investment and enter the economy by another route. However, a significant part of that money might well stay in industrial saving—it would not be spent in the short term, the period about which we are most concerned.
Should the private sector listen to the Prime Minister and obey the instruction to model itself on the 1·5 per cent. limit, or ignore it and follow the message contained in the Treasury's forecasts? There is great confusion about the Government's overall objectives.
All those factors seem to add up to the fact that the Chancellor has become an honorary member of the Cambridge Economic Group. We have devaluation, a fiscal boost and an incomes policy—the tripartite policy of the Cambridge group. The Chancellor has bought the lot. He has given a limited fiscal boost; he has introduced an incomes policy in a traditional Conservative way, starting with the public sector and asking the private sector to follow.
Do Conservative Members believe that there will be only one year of incomes policy? What will happen in a year's time, when the Chancellor—whoever he may be by then—has to say to the public sector that it cannot have wage increases of much beyond 1·5 per cent. and to the private sector that it must continue to exercise restraint? We seem to be re-entering a familiar period, which some of us who have been in the House for some time can remember.
The policy marks a significant change of direction, but I do not believe that it is the right one. Some people, including Conservative Members, suggested that the Chancellor had to make a choice—to adopt a cautious policy or to take considerable risks by undertaking additional borrowing to stimulate the economy. They suggested that the Chancellor had a choice between caution and risk, but there is no such choice. There is a choice of two risks. The first is to borrow in order to invest in measures that create employment and help to bring about recovery. The second risk is that there is no recovery and the borrowing requirement goes up and up because of the costs of recession.
The Government did not acquire their present high public sector borrowing requirement through a conscious desire to bring it about, and their objective was not to invest through borrowing. They acquired the high PSBR because of the recession. The borrowing requirement exists to pay for unemployment benefit and social benefits, and replace forgone tax revenue. That pattern will continue if we do not have a recovery.
We believe that the package proposed will be insufficient to bring about recovery. Our alternative would be to give a substantial boost to capital spending, funded by additional borrowing. That would be combined with a sound basis for monetary policy by means of an independent central bank and direct help to business.
We also argue that it might have been more sensible in the current circumstances to help those businesses which would otherwise go to the wall, by providing a cut or holiday in the uniform business rate, rather than introducing a capital allowance scheme that helps only those businesses that expect to pay significant amounts of tax, against which they can use an allowance. Many businesses are not in that position; what they fear is not paying tax, but going bankrupt. That is particularly true of many small businesses.
We would also like to have seen a significant expansion in training, which is quite out of the question under the projections given in the autumn statement figures. Instead of those measures to bring about recovery—

Mr. lain Duncan-Smith: Will the right hon. Gentleman give way?

Mr. Beith: No, I shall not give way; I am coming to a conclusion.
The Prime Minister thinks that he has changed his policy in favour of a dash for growth, but the Chancellor thinks that the policy is unchanged, except for the consequences of black Wednesday, which meant a change in interest rate policy. The current method of economic management, which is based entirely on judgment, is in the hands of a Government who have made all the wrong judgments. They have introduced a package which is supposedly dedicated to recovery, but which is insufficient to bring it about.

Mr. Cranley Onslow: I mean to be brief, but I hope that I shall be forgiven if I join my right hon. Friend the Member for Shropshire, North (Mr. Biffen) in congratulating my right hon. Friend the Chancellor on his autumn statement. I particularly welcome one part of the statement that has not yet been mentioned today: the undertaking given in column 994 of Hansard for 12 November that the Government would bring before the House a resolution to apply to Members' pay the same limits as they intend to apply to the public sector. That will be widely welcomed outside the House and, I hope, supported inside the House.
The problem has a long history, which I do not intend to rehearse today. I believe, and always have believed, that hon. Members should never shuffle off responsibility for fixing their own salaries. It would be an abdication of responsibility to do so. The temptation to do so has not always been resisted in the past, and the way that salaries have been decided has not always been satisfactory.
Therefore, I am pleased to see a return to previous practice, and I hope that it will herald a change in the basic approach to the matter, for which I have always argued and which I hope to see introduced now. Whatever is judged to be the appropriate salary for a Member of Parliament should be fixed by an outgoing Parliament before a general election, so that the incoming Members of


Parliament know what their salary is, never have to pass judgment on it, and need not expect it to be increased during the life of that Parliament.

Mr. Salmond: Will the right hon. Gentleman give way?

Mr. Onslow: No; I intend to be brief.
I hope that we can move towards such a policy, which is the only sensible and honourable way to tackle that difficult matter.
I can identify two sectors of our society where a change of attitude will be needed if the Chancellor's proposed measures are to work as well as he intends. The first is the banks. I do not think that any banker could deny the charge that banks have made a number of serious mistakes in policy judgment in recent years. They have made lending mistakes on an international and domestic level.
If I am rightly informed, between 1987 and 1989, the remuneration of an average bank manager was fixed on the basis of the amount of money he lent. It was based not on the quality but on the quantity of money that he managed to lend. It is not surprising that many of our fellow citizens in business found themselves encouraged to take on risks that, with better advice, they might have been encouraged to avoid. That was done in the name of market share among the major clearing banks. The consequences of that policy have been extremely unfortunate and regrettable.
I should like to think that we shall now see a change in attitude on the part of the banks—a much more positive, supportive and understanding approach, particularly to small businesses. I am afraid that, to judge from present evidence, that seems unlikely to happen. The press has recently had many stories about small business men being harshly treated by bankers. The House will have great sympathy with small business men, and much less sympathy with the banks.
I have recently been visited by a constituent in connection with this subject—as no doubt have many other hon. Members. My constituent brought to my surgery a letter that he had received from his bank undertaking to grant him a £75,000 overdraft. But the small print of the letter stated that the interest on the overdraft would be 4 per cent. above the bank's base rate, and subject to a minimum rate of 11 per cent. per annum no matter what happened. Not unnaturally, my constituent wrote back and said that the conditions seemed unfair, as they meant that he was unlikely to share in the full advantage of any prospective interest rate cuts. He asked how the bank could justify its policy.
The letter that he received in reply stated:
The Bank has taken the view that, in all but the largest lendings, as base rates fall there comes a stage where it is not cost-effective for us to continue to pass on these reductions. The minimum interest rate is the Bank's way of overcoming this.
I am sure that the bank manager who wrote that thought that his head office would approve and may even have thought that he had put himself in line for promotion. However, as a contribution to the revival of the economy it counts for nothing. It does nothing for the confidence of the small business man, and seems to embody much of what is wrong with the banking sector.
I hope that, when the Chancellor next has an opportunity to speak to, whisper in the ear of or shout at

the chairmen of our leading banks, he will tell them that a change in attitude on their part is an essential ingredient of economic revival.

Mr. Quentin Davies: Does my right hon. Friend agree that the fact that banks can get away with imposing such conditions on their customers at a time of recession, when there is falling demand for loans, poses questions about the degree to which there is a genuinely competitive market in banking? Some 90 per cent. of the corporate lending business in England is in the hands of four lenders. Does my right hon. Friend agree that that is prima facie evidence of oligopoly, which should be examined by the competent authorities sooner rather than later?

Mr. Onslow: My hon. Friend makes an excellent point. I forecast that, when economic conditions change and borrowers are in a stronger position vis-a-vis their current enslavement, there will be a fundamental change in the structure and composition of the banking system. Some of the principal banks may be displaced by incomers who will adopt a different approach and to whom would-be lenders will be almost irresistibly drawn. That will not be good for the banks.
The second change of attitude that the country and the Chancellor needs if his policies are fully to work must be made by the media. It is a long time since I suggested in the House that the "Today" programme was totally dedicated to getting the nation out of bed on the wrong side, and since then I have not noticed much change. However, it would be unfair to single out that programme, because the tendency is widespread. Shortly after the autumn statement, a "PM" programme thought it worth carrying a report from someone sent to the nearest high street to ask whether the autumn statement had led to any sign of a spending spree, as if that was an informed judgment and a fair test of the Chancellor's measures.
The concept that the effect of economic policy can be judged only by its impact on retail sales is fairly over-simplistic. However, it would be unfair to single out the BBC for criticism. To correct the balance, I need to look back only to last Sunday and quote the extraordinary episode on Brian Walden's programme.
The Secretary of State for Transport had been invited to be interviewed by Mr. Walden about the autumn statement, with particular reference to its impact on the Department's spending plans, which, of course, is a relevant matter. My right hon. Friend had been warned that in passing he might be asked one or two questions about other topical subjects such as Maastricht. But once in front of the camera, my right hon. Friend found himself subjected to an increasingly hysterical tirade by Mr. Walden because he refused to answer questions about Matrix Churchill, a matter totally outside my right hon. Friend's area of responsibility and totally outside the area upon which he had been led to expect he would be invited to answer questions. That is a thoroughly irresponsible way to conduct a current affairs programme.
It would still be unfair to imply that only radio or television are exclusively preoccupied with dishing out daily doses of doom and gloom. Any newspaper on any day will show that, generally, reporting is as negative as possible. The cumulative effect on the nation's morale cannot be ignored—and I am speaking about the effect not on the Government's standing but on national morale. Perhaps too many current affairs programmes and too


many newspapers and journalists are competing for sensational news in the progress of a circulation war. The media leaders should ask themselves how they expect confidence in Britain, at home or abroad, to revive when they ceaselessly accentuate the negative.
The positive elements in the autumn statement have been well listed in the CBI's reaction, part of which has been quoted. I shall rehearse them briefly. There is to be a significant increase in the transport network, not just in the construction of the Jubilee line but nationally in road building. That is right.
The change in the treatment of capital receipts is especially welcome. Unlike the right hon. Member for Berwick-upon-Tweed (Mr. Beith), I do not think that it should be impossible for local authorities to meet the Chancellor's target, especially if they look not only at house property but at industrial estates. Many councils should long ago have left the business of investing in such estates, and should have realised those assets and applied the money to more constructive uses.
The reduction in interest rates is welcomed by everyone, and the treatment of capital allowances and the stimulus to housing have been sought by many people, who will be glad to see those measures.
I must make one qualification. Although it is important to stimulate the housing market and to rescue many of my constituents from the negative equity trap, it cannot be sensible to try to drive house prices back to the peak of the late 1980s. That would make no sense and do no good. It would benefit estate agents, but eventually it would force up the price of development land, which is an artificially restricted commodity. Such an increase has no lasting value for any economy.
I hope that the Chancellor will bear that in mind, and that he will constantly seek to shift the emphasis on saving and wealth accumulation towards investment in productive industry and commerce and the creation of real national wealth.
I welcome the autumn statement. The country has welcomed it, and I hope that the House will also do so.

Mr. Roy Hughes: I agree with the right hon. Member for Woking (Mr. Onslow) that Members of Parliament should be responsible about their salaries. However, I am worried that some hon. Members are more equal than others and by the failure to consider remuneration from outside sources that is so prevalent among Conservative Members.
The autumn statement has been coloured by black Wednesday and our withdrawal from the exchange rate mechanism. Our problems have been exacerbated by the increasing depth of the recession. As unemployment approaches 3 million, the need to put people back to work is being increasingly recognised. The cost of state benefit for 3 million people must be enormous. It is like a tap left running—a complete waste.
To meet this situation, all that we had at first was a smokescreen, with all manner of horrors being suggested—increases in national insurance contributions, savage cuts in social security benefits and tax increases, all this amidst the worst recession in the past 60 years. None of these horrors materialised. What we got was a crackdown on the pay of public sector workers, many of them poor and needy. The policy will mean that a hospital domestic

will get only £1·80 a week extra and a staff nurse only £2·38. There is not much justice there when we think of the many thousands awarded to the chairmen of public companies, particularly those of the former public utilities—water, gas, electricity and British Telecom—and the cool half a million or so that is going to the chairman of British Airways. As for the chairmen of supermarket chains, they seem to have a licence to print their own money.
We have been told that the economy is suffering from a lack of effective demand. People are just not buying houses, cars, washing machines and so on. That is a classic Keynesian situation. The wages of the lowly paid public sector workers are to be restrained, yet they tend to spend what they earn, for their income is stretched to the limit. To restrict their wages could have the effect of further depressing the economy. Therefore, not only is it morally wrong to knock poor people in this way but it does not make economic sense.
The Chancellor has succeeded in keeping Government spending within the £244·5 billion ceiling fixed in advance, but only just. However, the PSBR has risen for the current year to £37 billion and is likely to be £44 billion next year. Conservative spokesmen had said that such figures spelt the horror that was likely to ensue if Britain elected a Labour Government in the spring of this year. Some of us are accustomed to such hypocrisy on the part of the Conservative Government.
The 1 per cent. cut in interest rates—a policy that has long been advocated by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), the Leader of the Opposition, and my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor—is welcome. It will benefit home owners and generally help to restore confidence. However, there is only limited help for the construction industry. Capital receipts accruing to local authorities from now until the end of 1993 can be spent over the next three years. If the Government really wanted to assist the construction industry, improve the quality of housing and increase the amount of affordable housing, they would have unlocked the £5·1 billion in accumulated receipts and directed it to a housing investment programme. Such a decision would have been a major factor in providing urgently needed housing as well as in creating jobs, since the benefit of a boost to the construction industry would be that it would put back to work not only unskilled workers and tradesmen but highly trained architects.
The Chancellor also ended car tax—a move that I warmly welcome. The construction industry and the motor industry could be the engine of our economic recovery. I have long been an unashamed supporter of the motor industry. Personal transport has been a great boon to ordinary families. Apart from the immediate facility, for them the car has opened up new horizons. It is used to travel to work, and more and more housewives take the car to the supermarket when they purchase the week's necessities. I appreciate that there are the problems of congestion and pollution, but these are issues that must be, and are being, tackled.
Another aspect of the industry is that, unfortunately, slightly over half of new cars coming on to British roads are assembled overseas. For at least a quarter of a century, the Volkswagens, the Mercedes and the BMWs from Germany, together with the Renaults from France and the


Fiats from Italy, have had a field day in the British market. Despite all the EC regulations, I want the Government to use their ingenuity to boost our car industry.
British cars are now first class. If we increase their share of the market, we shall ease our balance of trade problems and put our people back to work. The growth of the motor components industry has been heartening news. Wales relies heavily upon it, with companies such as Ford engines at Bridgend, Lucas Girling at Cwmbran and many other major firms. From a Welsh point of view, stimulus of the car industry will assist our steel industry, which is suffering badly from the effects of the recession.
Having said that, I should also say to my many friends in the motor industry that they should beware of a Shetlander bearing gifts. The Chancellor has already said that the £750 million lost through the decision to end car tax is to be recouped in the Budget through an increase in other forms of motor taxation. Yet the fact is that, of the £19 billion collected annually in motor tax, just over 20 per cent. is spent on roads. The Government are said to be seriously considering putting tolls on motorways. Wales already has tolls, on the short stretch of the M4 that runs over the Severn bridge. From 1 January, any heavy vehicle bringing vital goods and supplies into south Wales on the M4 will pay a toll of £9·30.
Any outside observer would imagine that Wales had an overheated economy. In fact, we have heavy unemployment. There is terrible deprivation in some areas, particularly in those badly affected by pit closures and steel redundancies. These tolls are a disgrace. What is more, the Government had no business to hand over the Severn bridge, together with construction of the second Severn crossing, to a French-American backed consortium, which is determined to extract the last penny. Tolls are an anachronism and for the Government even to be considering them on other motorways is the height of folly.
The matter does not end there. Some weeks ago, on 12 October, I challenged the Secretaries of State for Transport and for Wales to deny reports that the contract for the steel structure of the second Severn crossing was to be handed over to a foreign company. In reply, both said that the contract had not yet been awarded.
That answer was evasive, to say the least. A report on page 11 of yesterday's Financial Times clearly revealed that the £7 million contract is to be awarded to Cimolai—an Italian company that allegedly entered the lowest tender. I bet my bottom dollar that there is a hidden subsidy involved in that Italian tender. Britain has an efficient steel industry, and right by the Severn crossing is a company named Fairfield Mabey, which specialises in the construction of the steel works required for new bridges. A host of expertise in that type of work is available among the people of Severnside, but many there are out of work.
The President of the Board of Trade should keep his promise to the Conservative party conference to intervene before breakfast, before lunch, before tea, and before dinner on behalf of British industry. There is an urgent need for that, and I call on the right hon. Gentleman to act without further delay.
The Chancellor has taken a few short steps in the right direction, but there is a sleight of hand in it. One commentator remarked that the autumn statement is

stimulus by magic mirrors. It anticipates and embodies a growth rate of 1 per cent., yet to make any impact on unemployment Britain needs growth of at least 2·5 per cent. The autumn statement deserves to be judged in the way I suggest.

Several hon. Members: rose—

Mr. Deputy Speaker: Order. I remind the House that Madam Speaker has imposed a limit of 10 minutes on speeches made between now and 8 o'clock.

Sir Rhodes Boyson: I welcome the autumn statement, as other of my right hon. and hon. Friends have done, and was intrigued by the speech of my right hon. Friend the Member for Shropshire, North (Mr. Biffen)—particularly in respect of incomes policy. As to the salaries of Members of Parliament, I agree with my right hon. Friend the Member for Woking (Mr. Onslow).
I am only sorry that the autumn statement was not made two months ago, on the day that Britain left the exchange rate mechanism. We seem to have wasted two months finding a distinctive alternative policy. I have no belief in the ERM, which is something like GCSE economics grade seven. Schoolchildren run three-legged races, but the ERM was a 12-legged race, and all the runners fell down. It has been said that it is easier to foretell the winner of the Derby in the year 2000 than to know the value of a country's currency next year, because it is a judgment by the rest of the world as to the economy behind it.
I am glad that Britain has left the ERM, and that we now have a policy of moving towards lower interest rates. Again, it would have been better to take that action earlier and in larger dollops. That would have helped the housing market and those who pay mortgages—many of whose businesses are dependent on their properties. It would also have helped business men and encouraged people to borrow more.
Interest rates will have to fall still lower before we move out of the recession. When we left the gold standard in 1931, interest rates fell to almost a negative level before growth occurred again. No growth came between 1925 and 1931, because the pound was over-valued on the 1914 gold standard parity. With low interest rates between 1931 and 1937, Britain enjoyed the fastest economic growth of any power in the world—far ahead of America and even of Germany. In 1939, we had the economy to be able to stand up to Germany, and low interest rates are the only way of achieving growth again.
I welcome the emphasis on the construction industry and particularly on the Jubilee line investment, which will create employment for 12,000 people. Without it, the whole of docklands would have become a ghost town and a depressed area. The sooner that the Jubilee line is built, the better. However, I share the concern expressed by London Transport's chairman about lack of investment in the capital's other tube lines. My right hon. Friend the Minister should travel on the Northern line early in the morning and late at night to appreciate the agony that commuters suffer.
A number of lines run through my constituency, and they are used by those who commute to the City. Regular delays and breakdowns mean that travellers must leave home 15 or 30 minutes earlier in the morning—and can


never tell when they will arrive home. That has created the sandwich society, because the wife has no chance of knowing when to have a hot meal ready for her husband's return.

Mr. Mark Wolfson: Will my right hon. Friend give way?

Sir Rhodes Boyson: No, because I am under the ten-minute speech rule.
I have lived in London since 1962 and have represented a London constituency since 1974, and I believe that if it is to remain a major capital city, three important factors must be considered. One is transport. We are living still on the capital investment of the Victorians and Edwardians. Present investment is nothing compared with that which must be made to give the capital a proper transport system.
The second is London's theatres, and the third is its museums. I am sorry that cuts have been made there, because our capital has some of the best museums in the world. We must keep them up to standard, because many tourists come to London not just for its theatres but for its museums. They certainly do not come here for the tube travel.
I am suspicious and alarmed at the prospect of spending three quarters of a billion pounds on acquiring 20,000 repossessed houses. It would be better to help people to remain in the homes that they have. Why wait until home owners have lost their houses, local schooling, churches, and neighbours and then hand them over to a housing association? If that is not something out of "Alice in Wonderland" I do not know what is. Money available should be used to help people pay their mortgages, particularly at a time when the interest rates are being reduced so that they can remain in their homes.
I await the result of the council tax in London and the south east. If it costs no more per household than the community charge, I and my constituents will be happy. If it costs more, I shall not be happy—any more than my constituents. We are threatened again with a rates system from Labour, but householders will compare the council tax with the community charge that they have paid for the last three years. Anything new must be comparable.

Mr. David Evans: The council tax will not, on average, be more than the community charge.

Sir Rhodes Boyson: My hon. Friend puts his head on the block, but obviously he has specialist knowledge that will make headlines in tomorrow's newspapers. I know that he is a very wealthy man, so if my council tax is more, he can make it up. I welcome his gesture. It is one of the finest gestures that I have known for some time.
As to defence, I am increasingly concerned about this country's safety and that of the world. We will look hack at the balance of power between the NATO countries and the communist bloc as the most peaceful of our lifetimes. All the wars that are being fought around the world today will escalate and threaten us. I do not want any more cuts in this country's defence, for two reasons. First, I want the safety of this island of ours to be preserved; secondly, I think that the organisation of the armed services is one of the things that we still do well.
We are good at training. I would like to see a lot of short-service commissions, along with training for other ranks before they move into civilian life. I mentioned the

underground earlier. I think that a general should be put in charge of tube trains: he could be told that he will be made a lord if he makes them run in a year, and that if he does not his head will be chopped off. That, I think, would be a very effective sanction. [Interruption.] Perhaps my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) would prefer to offer alternative financial incentives—if, that is, any money is left after my constituency receives the subsidies due to it.
I welcome the autumn statement, because it seems that we have a policy at last. I am sorry that it came rather late, but I am glad that we have it. I hope that interest rates will be reduced further, and quickly, so that we can get the country going; I do not think that any other course will help. I also think that the construction industry is the key to recovery. It is not a question just of the extension of the Jubilee line; something must be done about the rest of London's tube network. We should provide incentives where we can.
Having said that, let me add that I am much happier than I was before I heard the autumn statement—although I hope that I shall be even happier on the day when the council tax is announced.

Mr. Alan Milburn: The autumn statement will probably go down in history as a missed opportunity. To Opposition Members, it seemed a very eclectic statement: it managed to steal a little from the CBI, a little from the House-Builders Federation and even a little from the Labour party. We were presented with a veritable pot-pourri of initiatives and ideas. Given the Government from whom the statement emanated, however, it still managed to come out reeking of free market failure; after all, a pot-pourri of initiatives does not add up to a strategy for growth.
It has been said that there is no strategy behind the autumn statement. There is a strategy; the problem is that it is concerned more with digging the Chancellor and the Government out of a hole than with rebuilding the British economy. It is precisely because the autumn statement was so geared to the short term, rather than to the long-term, deep-rooted crisis into which the economy has been plunged, that it will ultimately fail to return either long-term prosperity or growth to the country.
In many respects, the autumn statement constitutes an admission—an admission that many of the economic icons that Conservative Members have worshipped so long and with such affection have been destroyed. Whatever happened, for example, to the hostile attitude to borrowing? The public sector borrowing requirement is now set to spiral not to £40 billion but to £60 billion by 1994–95, and it may be even higher if we fail to achieve growth of 2·5 per cent. per annum.
The autumn statement is hardly confidence-inspiring in itself. It promises growth of just 1 per cent. next year; that hardly suggests that the Treasury believes its own claims about the statement's potential. It also fails to answer the question that the whole country is asking: when will unemployment stop rising? That is not an incidental issue. Without a reduction in unemployment, there will be no return of consumer confidence. The Henley Centre for Forecasting recently announced that some 6 million households were failing to spend because they feared that an increase in joblessness would affect them directly.
I am afraid that the increase in unemployment will not abate, because the Government have not done enough to make a real difference. Over the past two weeks, two major engineering firms in my constituency—Torringtons, and Darlington and Stockton Rolling Mills—have announced that 80 skilled workers are to be made redundant. Perhaps equally worrying is the fact that the redundancy announcements were accompanied by dire warnings that there would be no recovery in the market for the foreseeable future. The measures in the autumn statement will not hasten the recovery of first-class companies like those, because they fail to acknowledge the depth of the problem and do not tackle the three performance gaps that currently hinder the British economy: the gaps in manufacturing investment, training and support for the regions.
The temporary capital allowance incentive scheme for industry is all very well, but a sum of between £200 million and £300 million is hardly likely to close the investment gap between the United Kingdom and its competitors. Our industries are having to struggle for international markets with competitors that possess much better and more up-to-date plant and equipment. Between 1980 and 1989, this country spent less than £2,000 a year per employee on manufacturing investment; Germany spent nearly £3,000 a year, and Japan more than £5,000. That is not a temporary problem, and temporary solutions simply are not good enough.
The CBI's report "Making it in Britain" calls for a doubling of investment in plant and machinery by the end of the decade to enable United Kingdom companies to compete more effectively in the international market. The Government have ducked their responsibility to encourage industry to invest and to provide the necessary incentives.
The same applies to the Government's attitude to the United Kingdom's training deficit. It is universally acknowledged that the United Kingdom has the worst-trained work force in Europe: we have fewer workers with occupational skills than any other European country. Yet—as hon. Members will see when they read the fine detail in the autumn statement—our training budget is to be cut in real terms. Already this year, 500,000 fewer employment training places are being made available; the ET budget has been cut by £30 million, and almost half our training and enterprise councils are worse off in this financial year than they were in the last.
In regional terms, my region is the biggest loser. The north has lost £21 million. My TEC, Durham, has been cut by nearly £6 million. It would be an understatement to suggest that it is economically illiterate to cut training programmes in the region that has the highest unemployment in mainland Britain: in my view, that is plain daft.
Not only do we have a Chancellor and a Prime Minister who have destroyed more than I million jobs since getting theirs; they have cut the funds for those who are desperately trying to return to work. By cutting training budgets still further, the Chancellor is not only writing off the unemployed in the north, but weakening the whole country's competitive position.
The autumn statement as a whole spells further decline for the regions. The industry budget is to be cut by almost half between now and the middle of the decade—and, if

the experience of the last 13 years is anything to go by, we are in for severe problems. Since 1979, the budget for assistance to industry in the regions has fallen by 70 per cent., and in my region it has fallen by 85 per cent. That amounts to a massive withdrawal of funds. Many hon. Members whose seats are currently part of the assisted areas map fear that the cuts in the industry budget will bring about a loss of assisted areas status, a loss of new investment and a loss of new job potential in our towns and cities.
It is not as though areas such as Darlington—or, indeed, the north-east as a whole—do not have a potential for growth, but I fear that, without assisted area status, companies intending to invest in the north-east will begin to look elsewhere for the establishment of their new factories. This is not just special pleading for the north; it makes good economic sense for the Government to invest in all the manufacturing regions. As we saw in the middle of the last decade, free market regional policies inevitably mean overheating in one part of the country, usually the south, followed by an icy recession across the whole country.
Returning to the spending on the regions that we saw in the early 1980s would be relatively negligible in European terms. Indeed, it would cost the equivalent of one and a half extra lanes on the M25. Many Members from northern constituencies welcome the commitment to the Jubilee line, but we are concerned about the potential impact on our regions of cuts in the transport budget. There is great concern that those cuts will be felt most deeply in regions whose position on the periphery of the single European market should cry out for more, not less, investment in infrastructure.
The autumn statement is a missed opportunity to put Britain in Europe's fast lane. Instead, free market dogma has been set aside temporarily on a few high-profile projects, presumably until the Government think that their current troubles are over. Then it will be back to business as usual. There will be no partnership with industry, no attempt to tackle our training and regional deficits, and, worst of all, no ambition to help British industry succeed. It is a cost which the Government are happy to bear.

Mr. Michael Stern: The hon. Member for Darlington (Mr. Milburn) drew comfort from the statement from the Henley Centre for Forecasting. His comments might have been more valuable if he had not picked that body, whose forecasts in the past have been even less reliable than those of the Treasury.
In the 10 minutes available to me, I wish to concentrate on a small section of the autumn statement—its effects on the property market. In the autumn statement, which I sincerely welcome, my right hon. Friend underlined the point that the housing market remains depressed. It is not just the housing market that is depressed, but the commercial and industrial property market as well. The measures which my right hon. Friend has taken, which will affect the whole property market, are therefore doubly welcome.
The extent to which property values underpin so much of our economic and social activity is a peculiarity of the British economic system. A strong housing market is the only key to mobility of industry and labour. A strong property market generally underpins the whole banking


system, and by and large British banking cannot lead without reliable property values. The property market as a whole is the basis for the confidence which will be needed to enable the autumn statement to provide the take-off for growth which we all hope and believe will result from it.
In the context of the housing market, many of us who represent stressed inner or outer-city estates will know of the problems caused by what are now seen as the over-expectations of property values in the late 1980s, and the reaction from them.
I have only to go to Southmead in my constituency to see the boarded-up houses that are the result of people buying not from the council but from those who had bought from the council at what seemed proper values at the time, and who had found that, with declining income, perhaps because of unemployment or cyclical adjustments, they could no longer afford their mortgages. However, their properties were unsaleable. Even if they had sold, they would never have been able to buy another property because of the negative equity that they would thereby have realised.
In that context, I underline my gratitude to the Government for having recently altered the rules on negative equity so that that trap no longer applies. Therefore, people who still desperately want to own their own homes, since that is their preferred form of housing, will no longer be locked out of the market because of one mistake.
I draw my right hon. Friend's attention to one other aspect of the housing market. We hope that the reduction in interest rates will help to revive the housing market, but he could do something else. Over the years, there has been much discussion in the House of the value of MIRAS, the system of tax relief on mortgages. Opinion on both sides of the House is divided on MIRAS, but I believe in it. It is not reasonable to expect a revival in the housing market over the next few years, even to the extent of price stability, if the MIRAS system remains under threat.
While I would not ask my right hon. Friend the Paymaster General to recommend to the Chancellor any statement about the long-term future of MIRAS, I should like to hear that, at least in the short term, there will be no downward adjustment in its value. If such an adjustment were still feared, it would act as a negative factor in the housing market. In replying to the debate, I hope that my right hon. Friend will underline the need to retain MIRAS for the foreseeable future.
The commercial property market is equally a key to future prosperity, and will also benefit substantially from the reduction in interest rates that the autumn statement brought. As I said, commercial and industrial property is a key to banking, to the ability of new business to start and to the ability of existing business to expand. Therefore, we must be as careful to underpin property values in the commercial and industrial sector as we are in the housing sector.
One great barrier to a revival in business confidence is the fact that it is almost impossible to put a value on much commercial property. What my right hon. Friend has done will go some way to overcome that, but other supply side measures could have an equal effect on the commercial property market.
Many of us have seen the effects in our constituencies when someone in business who assigned a lease of, say, 25 years many years later finds the original landlord knocking on his door because all subsequent tenants have defaulted.

That cannot encourage people to sign leases to start in business or to expand their businesses. My right hon. Friend should encourage his noble Friend the Lord Chancellor to re-examine that aspect of the law to see what can be done at least to limit the liability of an assignor.
A further aspect of commercial leases which acts as a barrier to the person who is starting or expanding a business is the ratchet effect on rent renewals when the renewal can only be upwards. There has grown up within the banking sector a belief that the only suitable security for a leasehold property is a lease with a guaranteed increase in rent. The result is that, where rents have got too high—for example, in a shopping centre—the only way in which that shopping centre can be revived is through the bankruptcy of every tenant, so that leases can be torn up and they can start again.
That may be a slight exaggeration; occasionally, despite the terms of the lease, downward rent reviews are agreed, because that is the only available alternative. The fact is that the barriers to downward rent reviews, where the circumstances in a particular property market have changed, are too great, and must be relieved. My right hon. Friend the Chancellor of the Exchequer can help In this relief by making sure, through discussions with the Bank of England, that the banks and insurance markets—which will lend, as security, only on commercial leases with an upward-only rent review—are encouraged to reconsider their attitude to leasehold property so that they themselves do not act as a barrier to a truly mobile market in commercial property.
I have focused on one aspect in what I believe was a major autumn statement. When he summed it up, my right hon. Friend the Chancellor of the Exchequer said that its purpose was to make the markets work better. I believe that he will succeed, but a number of supply side measures can still be taken that will aid my right hon. Friend in making the markets work better and creating the recovery and growth that this country needs.

Mr. William Ross: ; The hon. Member for Bristol, North-West (Mr. Stern) will forgive me if I do not follow the line of argument that he pursued in his thoughtful speech. Instead, I shall concentrate on other matters that concern me and the people of Northern Ireland.
In a most vigorous speech, the hon. Member for Dunfermline, East (Mr. Brown) attacked, among other things, the speech that the Chancellor of the Exchequer made in June or July of 1990 about the situation that prevailed in our country at that time—especially the economic life of the nation. I noticed that the Chancellor smiled. I wonder whether he, like me, recalled that, at that time in 1990, this nation had not entered the exchange rate mechanism, and that we did not do so until considerably later in the year.
In his autumn statement, the Chancellor of the Exchequer told the nation that our membership of the exchange rate mechanism was wrong. Admittedly, he did not say so in so many words, but that was what he implied. He suggested that, when we were in the ERM, monetary policy was tighter than it needed to be, and that now, with a floating pound, he has been able to cut interest rates by 3 per cent.—interest rates now being set according to British monetary conditions. The implication was that,


when we were in the ERM, interest rates were set according to monetary conditions that prevailed elsewhere.
Another speaker in the debate inaccurately described the day we left the exchange rate mechanism as black Wednesday. I do not consider it to have been at all black: I think of it as the day when the chains that bound our nation were cut. I welcome the fact that the Chancellor of the Exchequer is now free to act in the interests of the United Kingdom, and I sincerely hope that we stay in that happy position.
When he made his autumn statement, the Chancellor confirmed that the public sector borrowing requirement had increased by a third from his forecast in March of this year. Given that the sum is £37 billion for this year and that it is to rise next year to a figure that the Chancellor dared not forecast, the question that I asked last year—whether the Government had abandoned the concept of the balanced budget—was one with which I did not care to embarrass the Treasury Bench last Thursday.
However, that question will keep coming back, because the level of the PSBR does matter, as the Chancellor admitted when expressing his concern about the sums that he now has to find for interest payments. I understand that that sum is about £18 billion or £19 billion a year. I feel fairly sure that, if the Chancellor had that sum to play around with now, he would be a very happy individual.
The real concern is that the £37 billion that has been borrowed is being used not for capital expenditure but for current expenditure. The Chancellor said in his statement that social security benefits—which is another term for unemployment—were the cause of much of the increase in the PSBR. However, in answer to a question from me, the Chancellor said that the PSBR had increased because of falling tax revenues—another way of saying that it was because of unemployment.
The Chancellor then told us that he expected the PSBR to decline over time. I noticed that he was careful to say that it would decline as a percentage of gross domestic product, not of the total sum. He is therefore clearly not thinking of the situation in which we found ourselves a year or two ago, when we were able to repay debt. The PSBR sum can decline only if employment prospects improve quickly, or if the Chancellor increases taxes.
On this occasion, the Chancellor was kind enough to forgo the revenue he could have gaind by raising national insurance contributions, or taxes and other fees, but the reality is that he has only postponed that action. I believe that he will be unable to avoid tax increases over a fairly wide base next March if he hopes to get the PSBR back under firm control. He will have to keep firmly in mind the fact that, with a £37 billion deficit, the debt total for the nation will soon be over 50 per cent. of gross domestic product. Neither the Chancellor nor any other hon. Member would welcome that.
In the present economic climate, the Chancellor has tried to ring-fence capital projects in order to provide employment. Many projects in every part of the United Kingdom are waiting for the go-ahead. I shall mention but two, one of which I consider to be absolutely vital to the long-term infrastructure and welfare of Northern Ireland—the upgrading of the Belfast-Larne road. The other is in my constituency—the Limavady bypass. Those are small

matters for the House as a whole, but I hope that the Secretary of State for Northern Ireland will bear them in mind whenever he is considering what he can do under the Government's changed expenditure plans.
The help that has been offered for housing, in one form or another, is of more value than road building. Most road building is done with machinery and very few people. The construction of all sorts of buildings leads to the employment of large numbers of people. Anything that increases the number of folk employed in the construction industry is to be welcomed. The problem, however, is that many of the fixtures and fittings for houses now have to be imported; they are no longer produced here.
Another aspect of the construction industry in Northern Ireland concerns the rebuilding that has to take place after terrorist violence. Coleraine, the principal town in my constituency, has a heck of a lot of that to do after last Friday night. I am pleased that London was spared that day the attention of the bombers. We are grateful to the security forces for having managed to intercept those people before they were able to commit their evil deeds. My town was not quite so fortunate.
The Government clearly accept that there is a need to build confidence in the nation and in the community at large in order to move us forward out of the recession. The Paymaster General will appreciate that the same inspiration and confidence is needed by an individual who has suffered as a result of terrorist action.
If the Government bear that in mind, greater help will be provided for businesses in Northern Ireland that suffer as a result of terrorist violence. The cost of security and the cost of restoration after bomb damage is high in terms of the public purse, but the alternative, if we think about it logically, leads to anarchy. No one wants that.
The Government motion asks us to approve the autumn statement. We are asked to welcome the control of public expenditure, which is a doubtful claim, but hopefully there will be better news next March. The motion also asks us to congratulate the Government on the reduction in underlying inflation, congratulations that we sincerely offer. We are being asked to thank the Government for their attempts to get us back on to the path of duty, which has been somewhat neglected in the past few years.
The Opposition amendment, on the other hand, regrets that the harsh truth was told by the Government in the autumn statement, but they do not spell out their alternative in any detail. Therefore, I regret having to tell the Opposition that, since they have not been more positive, we cannot support their amendment.

Mr. David Martin: Having listened to speeches by Opposition Members—the speech by the hon. Member for Londonderry, East (Mr. Ross) was an exception—it is clear why more than 14 million people did not put their trust in the Opposition in the general election. The Opposition have plans to go on and on spending without having any proper way in which to pay for it.
Serious as our position is, we are not in the kind of crisis that previous Labour Governments, with or without Liberal support, failed to tackle. In present circumstances, with their present leadership and with their present policies, Labour would fail again.
I have no doubt that the first priority in my right hon. Friend's mind in fashioning the autumn statement was the correctly identified need to build up confidence in our economic future as rapidly as possible. Some have criticised my right hon. Friend for not starting that task earlier. I have some sympathy for my right hon. Friend. He is like a man who inherited a house that was fully furnished by two predecessors in title whom he had understudied for some years. The last piece added was membership of the exchange rate mechanism. From then on, the contents were treated like heirlooms, to be preserved in their inherited condition. That was the position until the vandals rudely and abruptly broke in on so-called "black Wednesday" and the defences against them were raised in vain. When the vandals left, much was in disarray.
Many around the Chancellor were at first like Rachel weeping for her children and would not be comforted. It was rumoured that my right hon. Friend was not joining in the weeping. He was, no doubt, recollecting the wise words of the great Lord Salisbury that one of the commonest errors in politics is sticking to the carcases of dead policies.
A month later, the Prime Minister raised before our eyes the high road to recovery and growth—the British way. The energy and imagination with which my right hon. Friend the Chancellor, ably helped by the Treasury team, have set about furthering that policy are clear from his proposals and from the politically skilful way in which he presented them to the House last Thursday. My right hon. Friend the Chancellor will need all that skill—I wish him luck in his task—in fashioning part two, which is the Budget next March in which he will set out more detailed measures by means of which the large existing and even larger projected Budget deficit for future years is credibly to be financed.
If we are to get out of the recession with sustainable real growth, low inflation, low interest rates and the creation of the jobs required, I have no doubt that my right hon. Friend will need the spirit of 1981 and of the noble Lord Howe rather than the ghost of the late Lord Keynes. Public borrowing as a proportion of national income must be reduced. If we choose to support high levels of public spending and growth—we hope for growth which may or may not pay for such public spending in the future—we must support the taxation and other measures necessary to fund them. That was the essence of the spirit of 1981. There was then no belief—

Mr. Austin Mitchell: Look where that got us.

Mr. Martin: I shall explain in a moment where it got us. There was then no belief in greatly increased public sector spending being the vehicle of growth, in pay norms and in pay freezes. We were too close to the memory of the Opposition's failures in the 1960s and 1970s, including the damaging industrial unrest, the bottling up of inflationary pressures, and the feeling that every pay claim was decided in Downing street and that every breach of the norm was a victory against Downing street. We have spent many successful years putting a distance between ourselves and those notions.
In 1981—here I come to where it got us—in the teeth, famously, of 364 economists and others who said that it was all impossible, the noble Lord Howe courageously laid the foundations for six years of sustained growth, low

inflation, falling unemployment, record numbers of jobs and ever increasing prosperity. My right hon. Friend the Member for Brent, North (Sir R. Boyson) reminded us about the 1930s. Those six years were the longest such period for 50 years—since the 1930s. That was Conservative government at its best. There was a genuine break from the failures and the retreats of the past in the teeth of misguided calls to change gear. It was also electorally rather popular.
By 1988, we had public sector debt repayments, not a public sector borrowing requirement. What happened from 1988 onwards was not the result of economic policy faults related to those earlier years. I confess that I rather hanker after those times. I have not yet been sufficiently educated or politically corrected. These days, in my rather melancholy moments, I feel like the poet Thomas Moore who said:
I feel like one Who treads alone Some banquet-hall deserted, Whose lights are fled, Whose garlands dead, And all but he departed!
I felt that today until I heard the speeches by my right hon. Friends the Members for Shropshire, North (Mr. Biffert) and for Brent, North. They are lurking somewhere in the corners of that banqueting hall.
We must all look ahead. Under my right hon. Friend the Chancellor, we have the lowest interest rates since 1978. We have an obviously competitive pound, we have low tax rates and we have special incentives for investment. Those are firm foundations, one hopes. With the necessary Budget measures next March, we have a chance to enjoy in the 1990s the economic confidence, the rising prosperity, and the hope that we enjoyed in the mid-1980s. In bringing about that happy series of events, my right hon. Friend will have my support, 242 majority and all.

Mr. Peter Mandelson: In the speeches so far, apart, perhaps, from that of the hon. Member for Portsmouth, South (Mr. Martin)—who seemed to find little wrong in the economy, although his perceptions and his departure from actualité may be influenced by the fact that he was previously a Parliamentary Private Secretary to Mr. Alan Clark—a clear recognition is emerging that the biggest barrier to economic recovery is the lack of confidence in the economy, and that the biggest barrier to confidence is the length, extent and nature of unemployment in our country.
That is why I say that jobs, jobs and jobs should have been at the heart of the autumn statement. That should have been the overwhelming impact and effect of the Chancellor's measures. It is in the Chancellor's failure to tackle the need to create jobs directly, swiftly and where they are needed that the statement's failure lies.
In his speech today, the Chancellor seemed to recognise the logic of what I am saying. He said that confidence was the key to unlocking recovery, and that confidence was the essential condition for increased spending in the economy. The problem is that, while wishing the ends and desiring to see confidence grow, the Chancellor is, tragically, apparently not prepared to take the necessary action to lift that confidence and to ensure that recovery comes quickly.
A serious absence from the statement and the one thing that would immediately give a tremendous boost to


economic recovery by reducing the fear of unemployment, lifting confidence quickly in our economy and making such a difference to millions of people and families blighted by unemployment throughout the country would be the introduction of a new Government programme of work to tackle mass unemployment—a programme to allow people who are unemployed once again to work in their communities.
As everyone recognises, the recession is now so deep that the private sector, it must be manifestly clear to all hon. Members, cannot by itself, whatever action it wants to take and however much it wants to resume growth and to bring forward investment, overcome the fear of unemployment. Nor will the capital projects the Chancellor has announced, which will not start early enough or be extensive enough to help to overcome that fear of unemployment.
Those measures cannot by themselves stimulate the employment necessary to build confidence in the economy quickly enough to promote growth in the way we all want. That is why I argue that it is so crucial for the Government to step in to aid recovery by introducing measures to take people off the dole queues and put them to work. I believe that that need has never been greater at any time in recent memory.
We now have the highest male unemployment since the 1930s. Many people believe that the real level of unemployment is closer to 4 million than to 3 million. In my region—the northern region—31,000 more people have joined the ranks of the unemployed since the Chancellor took office. The number of people out of work for more than a year—the long-term unemployed—rose by 50,000 in the three months to October.
There is now a four-and-a-half year high in the number of long-term unemployed, at 956,000. The Secretary of State for Employment recently described that figure as the smallest for a year. I cannot understand how she can describe it in that way. Long-term unemployment has risen 46 per cent. over the figure a year ago. More than half the people out of work in my constituency have been jobless for six months. Very many of them have been unemployed for more than a year.
It is not surprising—although it is certainly very revealing—that the autumn statement made no forecast of unemployment next year. We know from every authoritative estimate that growth of more than 2·5 per cent. next year will be required to have any impact on the level of unemployment. However, even the Government's own forecasts hope for a growth rate next year of 1 per cent. On the Government's own admission, therefore, growth will be too weak next year to bring down unemployment, which Goldman Sachs predicts will swell by hundreds of thousands of people, thus raising fear of unemployment even more. That is why I believe that Britain needs an immediate employment programme.
The paltry crumbs offered by the Department of Employment over the past week were tragically inadequate. The initiative was pitiful. According to a press statement from the Secretary of State for Employment, her contribution to fighting unemployment consists of the formation of something called jobplan workshops and the merging of employment action and employment training.
The best the Government can do as bankruptcies rise, firms collapse and more and more people are made redundant is to merge two already inadequate small programmes and set up jobplan workshops, which are the old restart scheme rechristened and made compulsory. People will be hauled into jobcentres and asked what they are doing to search for non-existent jobs.
The only difference between jobplan workshops and restart is that, instead of one and a half hours of frustration explaining why one cannot find a job, the new scheme requires people to spend four and a half days explaining, and if they do not last the four-and-a-half-day course, their benefit is docked.
The Government's approach is shamefully simple and inadequate: less training, more coercion and no separate jobs programme for the unemployed. There are merely exercises in public relations, when we really need a programme of public action. I do not decry the efforts of local jobcentre staff, who are doing the best they can. However, they are being asked by the Government to put more effort into the management of publicity than into the organisation of work for the unemployed. That is a tragedy.

Mr. Julian Brazier: Has the hon. Gentleman visited his jobcentre?

Mr. Mandelson: Yes; I have visited it twice.
The tragedy is not that we are short of experience of setting up the kind of jobs programme we require. The recent community programme had its critics, and I was certainly among them. However, at its best, it combined a chance to work, train and search for a job. I believe that the community programme could have been developed and improved, and turned into a proper programme for the unemployed.
Work that would be rewarding for individuals on such a programme would also be immensely useful to the community. It is work that needs to be done. For example, in the environment it could involve clearing and making up derelict sites so that they can be put to practical use. In relation to energy, so much loft insulation and conversion work is required—

Madam Deputy Speaker (Dame Janet Fookes): Order. The rule is inflexible. I call the hon. Member for East Lindsey (Sir P. Tapsell).

Sir Peter Tapsell: I very much welcome the change of economic and financial policy since 16 September in respect of which the autumn statement is a very useful further step forward. I welcomed it on the day.
I do not share the view of the shadow Chancellor and other Opposition Members who have spoken today that it is sad that we have moved away from the dogma of an obsession with sterling M3, medium-term financial strategy, shadowing the deutschmark, being obsessed with a public sector borrowing requirement figure which had been set years before in different circumstances and which cannot be changed and changing over to the traditional policy of the Chancellor's judgment. If the Chancellor does not have good judgment, then the Chancellor should be changed—[HON. MEMBERS: "Hear, hear."] I am not suggesting that he should be; I am simply making a general observation.
We are sent to this House to bring our judgments to bear. That is what we are here to do. We are not a tribe of American red indians who set up a totem pole and believe that it will solve our economic problems for us. Factors such as the PSBR and monetary aggregates are all tremendously important, as are the parities with other major currencies, and they must all be taken into account at all times by the Chancellor. However, it is a great mistake—and one that we have made repeatedly in the past—to set up one of those as a particular yardstick.
When Mr. Charles Goodhart was at the Bank of England, he quite rightly pointed out in what has now become known as Goodhart's law that as soon as one sets up a particular yardstick, it ceases to do the job for which it was invented. Our new approach of using all the yardsticks but allowing the Chancellor, the Cabinet and my right hon. Friend the Prime Minister to use their judgment is much more likely to produce good results. I argued that point of view throughout the early 1980s when an entirely different view was held.
One of the prime objectives, quite rightly, in the autumn statement is to increase investment. There has been under-investment in Britain for a century. Joseph Chamberlain complained bitterly about it in the first decade of the century and he pointed out the much higher rate of investment in industry in Japan, Germany and the United States. One could read out passages of his speeches made in 1903 and 1904 and they would be absolutely apt today. Nothing has really been done about it for a century and it is about time that we put it right.
In that context, I want to refer to inward investment from Japan about which a great deal of absolute nonsense has been talked. I have had more than 30 years' experience of business with the Japanese in one way or another and I am an international adviser to three huge Japanese companies which trade world wide and have a lot of investment in Britain. I should like to explain what I think is the truth about inward investment from Japan.
Some people have suggested that the debate about Maastricht and the uncertainty about the attitude of the House of Commons to the Maastricht treaty will damage inward investment from Japan which has been immensely valuable to Britain in recent years and has accounted for 40 per cent. of all Japanese investment in the European Community. It is true that, this year, there has been a decline in Japanese investment in Britain, but that has nothing to do with Maastricht—or only marginally, anyhow—and there are two reasons for that decline. One is that Japan is going through the same recession that the rest of the industrial world is experiencing and its banking system is pulling in its loans, and the Japanese are more reluctant to invest anywhere overseas in the present conditions.
The other reason is that the Japanese anticipated that Britain would have to leave the ERM and devalue. One did not need to be clever to know that. On 16 July, the day before we adjourned for the summer recess, I told a member of the Whips Office, my hon. Friend the Member for Chipping Barnet (Mr. Chapman), that we would almost certainly have to leave the ERM and either devalue or float in the week before the French referendum. Everyone who takes any interest in such matters, except members of the Treasury, was aware that that was almost bound to happen. Of course great Japanese companies are not going to invest huge sums in a currency that is about to be devalued. Incidentally, as a result of devaluation,

they have made a substantial short-term book loss on the investments that they have already made. Those are the reasons for the slow-down in their investment.
The Japanese want access to the single European market. They understand that Maastricht has nothing to do with that. Maastricht adds all sorts of things about a federal Europe, about a single currency, which they do not want, because it would reduce their room for manoeuvre and bring about European monetary union and a federal Europe, all of which they regard as a threat to Japanese interests. No shrewd Japanese industrialist wants to see anything like a close-knit, centralised, federal Europe. Japanese industrialists want access to the huge market, and that is guaranteed to them through Britain's existing treaty arrangements. The fact that we have signed the Rome treaty and the fact that we have signed the Single European Act gives us access to the free market. For a variety of other reasons, not least that we are the European country which is closest in sympathy to the United States, which is the Japanese prime market, they prefer to invest in Britain and they will continue to do so. It is ludicrous for some people to pretend that, if we do not endorse the Maastricht treaty, the Japanese will change their policy because of fear of a fortress Europe being set up.
One hears scare stories that Germany, France, Holland and one or two other countries might tear up the Rome treaty and the Single European Act and start a new fortress Europe of their own with high exterior tariffs from which Britain would be excluded and that, therefore, the Japanese might transfer their investment to France and Germany. That is not going to happen. For one thing, if a group of European countries attempted to do that, they would immediately provoke a total and permanent breakdown of the GATT arrangements and violent tariff reprisals by the United States and Japan against them, That is not going to happen. Our access to the single European market, whatever happens to Maastricht, is guaranteed, and the Japanese know that.
Many Ministers and people such as the chairman of the stock exchange, who wrote an absurd letter to The Times last week on this subject, should know better than to use arguments which are absolute nonsense and which no top Japanese industrialist believes for a moment. I promise the House that that is the case. I hope that we will hear no more of that line of argument.
The Japanese are most scared that Europe will become involved in a tariff war with the United States as a result of the breakdown of GATT. They have a much bigger trading interest in the United States and wider diplomatic and defence interests there than they have in Europe. They are extremely concerned about the present negotiations between the European Commission and the United States over GATT and fear that they may be caught in them. The worse the relations between the Commission and the United States become on GATT the more strongly the Japanese will feel that Britain is the best clearing house for their European investments.
The European economy is extremely important to us because of our large exports to Europe. I have always favoured the closest possible economic and trading relations with Europe. I voted for the Macmillan 1961 application. I have voted all the way through for the pro-European ticket, including the Single European Act, because I believe in the best possible trading relations with an enlarged Europe. I voted against Maastricht recently because it is adding quite—

Madam Deputy Speaker: Order.

Mr. Peter Hain: The autumn statement has failed abjectly to measure up to the scale of the crisis for which the Government have been responsible over the past 13 years or so. They have created a candy-floss economy from which we are suffering.
In supporting that statement, I need rely on no more than the Chancellor's own words. In an answer to me on 6 November, he pointed out that consumer expenditure between 1979 and 1991 rose by 37·5 per cent. and that, by comparison, output rose by 23·6 per cent.; that output excluding North sea oil production rose by 21·8 per cent.; and that manufacturing output rose by 5·8 per cent. All those figures are at constant prices. In other words, consumer expenditure rose by almost double manufacturing output excluding North sea oil production, and consumer expenditure rose almost seven times as much as manufacturing output.
The Chancellor is grappling with massive forces which are beyond his control, or which he has decided not to control because he does not want to adopt policies that can help him to do so. His behaviour is not like that of a maiden aunt who has had a few too many glasses of Pimm's and has become rather merry but is like that of a roaring drunk, staggering from binge to binge via ever longer hangovers.
One needs to look no further than the statement of a leading industrialist, Mr. Neil Johnson, the director general of the Engineering Employers Federation, to The Guardian of 28 October:
All the Government does is throw up its hands and say `it's nothing to do with us Guv'. The Government does not understand the crisis and ministers quote statistics that are demonstrably not correct.
That statement was not by a left-wing Labour Back-Bench Member but by a leading engineering industrialist.
Another past leading industrialist is John Harvey-Jones, the former chairman of ICI. On 1 November, he wrote in the Observer that the Government are
destroying our industrial base, to the level where it cannot sustain our standard of living.
That is another reason why the Chancellor's autumn statement does not measure up to the scale of the crisis into which the British economy has been plunged.
We should look, for example, at the catastrophic balance of payments. To use the autumn statement's own figures, there is a £12 billion deficit in the current financial year, rising to £15·5 billion next financial year. In all probability, if there is an upturn, the balance of payments gap will worsen.
Kevin Gardner of S.G. Warburg, the merchant bankers, said recently that, for the first time ever in Britain's industrial history, we are dogged by a combination of rising import penetration at a time of falling domestic output. That has never happened before. For example, in the second quarter of 1992, manufacturing output fell by 1·4 per cent. but manufacturing imports rose by 8·3 per cent. The Chancellor seems impervious to the depth of the crisis for which he is responsible and with which we are now all grappling.
The Chancellor's answer to my intervention earlier today did not measure up to the figures in the autumn statement. It is interesting that The Sunday Times reported at the weekend that senior Treasury and Downing street sources were saying that the Government would have to

increase taxes in order to keep the PSBR below the 7 per cent. limit which they say they will not allow it to exceed in the coming financial year. The tax increases may be in the form of VAT, national insurance contributions or excise duties increases. Without such increases, the figures contained in the autumn statement and the projections for the next financial year simply do not add up.
The figures do not add up in another respect. The Government predict that unemployment will remain at about 2·8 million. Most independent forecasters suggest that 3·5 million is much more likely. The Chancellor must come clean on that. If unemployment rises to 3·5 million, that will play havoc with the Government's finances.
Although the autumn statement showed that Government borrowing was set to hit £37 billion—much greater than forecast this year—and rise to £45 billion in 1993–94, many City economists expect the PSBR to go much higher—to £50 billion or even higher. For example, according to Goldman Sachs, the state of the public finances will depend on the economy's growth rate, and an output growth rate next year of 2·5 per cent.
would be just sufficient to stabilise the level of unemployment at just under 3·5 million".
Yet the Government predict unemployment of 2·8 million. Goldman Sachs says that the PSBR, excluding privatisation proceeds, will be left stuck at about £60 billion to £65 billion. That is a deficit of about 9 per cent.
Michael Saunders of Salomon Brothers says that the slow economic recovery in prospect means that borrowing could rise well above the Treasury's figures. He predicts a PSBR of more than £50 billion, or 8 per cent. of GDP, for next year, rising to £65 billion, or 9·5 per cent. of GDP, by 1995–96. He concludes correctly that
Higher taxes or spending cuts appear inevitable".
So the future is gloomy, and the Government are not coming clean about their own figures, let alone the position in the real economy. If the economy grew at only 1·5 per cent. a year in the three years covered by the autumn statement, unemployment would almost certainly rise, even on the figures in the autumn statement. Public borrowing would probably balloon to more than £80 billion by the end of this Parliament. Those are disturbing figures.
A PSBR of more than 9 per cent., or even as high as 13 per cent., compares poorly with the 3 per cent. PSBR specified in the convergence conditions specified for monetary union under Maastricht. The British economy is way out of line with the projections for monetary integration under Maastricht.
What are the prospects of recovery under the Government's policies? As it is being set in train by the autumn statement, and as it has been developed in the past three years, the British economy is unsustainable, given both the inherent industrial weakness of our economic base and other constraints on the current account deficit. The deficit will explode if there is even the modest upturn projected by the Chancellor.
Then the economy will be locked into the same old rising balance of payments deficit and higher interest rates to claw back our deteriorating trade condition. That is another reason why it is almost inevitable that taxes will be increased next year in one way or another, if the Government's policies are followed.
Another constraint which makes the Government's policies unsustainable is the limit on public sector pay increases to 1·5 per cent. next year. The Government's


figures in the autumn statement assume that public sector pay increases will be pegged to about 3 per cent. in the following two years. The Government also predict that average earnings will increase by 5 per cent. a year. That will create a massive gap of almost 10 per cent. between private and public sector earnings. That will be impossible to sustain, and will cause extra pressures and problems.
The alternative, which the Chancellor has not addressed and the Government are either unable or unwilling to address, is an entirely different strategy, which would kick-start the economy and demand by means of investment led by the public sector. At least £10 billion is required even to begin to meet the scale of the problem. We need investment in jobs, infrastructure and training and a much stronger regional policy. In Wales, regional preferential assistance has been cut by 60 per cent. since 1979.
We also need an economic policy which begins to grapple with the fundamental financial problems.

Madam Deputy Speaker: Order. I am sorry, but I have to turn off the tap of the hon. Gentleman's eloquence.

Mr. Robert Banks: I am delighted to follow the hon. Member for Neath (Mr. Hain), because I, too, wish to make some remarks about borrowing. I understood from his speech that he was critical of the Government for their level of borrowing. Yet the shadow Chancellor gave the impression this afternoon that he would borrow much more. He would certainly have to borrow more if he spent the sums that he suggested.
The autumn statement is a brave statement. It is a Budget more than a statement. I am delighted that the Budget will be incorporated with the autumn statement next year so that we can deal with it at a better time of the year. The autumn statement is an extensive package to stimulate the economy and help to bring us out of recession. However, we have always had to rely on the economies of other countries to help us with that process. The United States has normally led the rest of the world out of recessions.
On this occasion we need to examine the international scene carefully. The summary of the world economy in the autumn statement begins:
Recovery in the world economy has stalled again.
It is salutary to consider the state of economies other than that of the United States. The United States economy is improving. I do not denigrate that improvement. However, it is not improving with surety. We must also consider economies in Europe and other parts of the world. They are in a recession almost as bad or even worse than our recession.
The crucial factor is our ability to sell goods and services abroad, attract an inward flow of foreign currency to both the City and elsewhere and bring tourists to Britain with their foreign currency and spending power. I prefer to call the tourist industry the visitor services industry. The word tourism gives the impression of people milling around on holiday, but it covers a range of other activities in which I am particularly interested.
In order to attract tourists we must market the product. We have an extraordinarily good product. I welcome the spend on the heritage. Our heritage is one of our great attributes in attracting people to Britain. We must do a full marketing exercise. My hint of regret about the autumn

statement is that the tourism budget will be held fractionally below this year's budget and is scheduled to fall in the following two years. Some £46 million will be spent next year.
We must have the methods necessary to market our largest industry. We need the money to ensure that our advertising overseas receives full treatment. It is a case of selling our goods and services.
The statement is a budget for industry because it helps industry in a variety of ways, some of which I particularly welcome. Lower interest rates help industry and everyone else. Lower inflation also helps industry. The 40 per cent. first year capital allowance for investment in plant and machinery is an excellent idea. I want the Government to expand the stimulus for industry to modernise.
The science budget is to be increased slightly. Nothing is more important than developing our science and technology—improving our basic and strategic research in science, engineering and the social sciences. In the coming year that budget will be about £1·170 billion, which is a modest rise.
My hon. Friend the Member for Lindsey, East (Sir P. Tapsell) referred to his connections with Japan. We can lift many examples from the Japanese economy. I should like us to follow the example set by their Government, which works with industry to pioneer research into the next generation of technology, for instance, of robotics and of certain types of machinery. Their industry has had Government assistance in the form of low-interest loans spread over many years. There could be such a partnership here to define which industries should be developed and expanded.
In this country there are many examples of phenomenal expertise, which is dissipated because industries do not have the means to develop innovations, or the experience and research which are endemic in many of our institutions. That is where the Government can have an interplay with that sector and could develop our industry so that we improve our performance in world markets. We must do so, and we must concentrate on manufacturing.
I said that tourism, which is our largest industry, is important, but we can only spend money if we sell goods and services abroad. It is important to put the greatest emphasis on manufacturing.
The statement tells us that the borrowing requirement for the present year has risen by £11 billion to £37 billion—the original estimate was £26 billion. In 1993–94, it will rise to about £44 billion. If we estimate a borrowing requirement of £31 billion for the year 1994–95, we will have spent about £110 billion to try to buy ourselves out of recession. The autumn statement is brave because that is a heck of a lot of money to borrow. To sustain such borrowing, we must achieve performance levels commensurate with the incentives given.
Industry has a lot going for it and we must engender its confidence. Our industry can tackle markets abroad, especially in Europe. I believe passionately in, and want us to be in the forefront of, Europe. With the lower value of the pound, lower interest rates and the proximity of Europe, a vast market exists there for so many of our products. I have this advice for our industrialists, "For goodness' sake, get moving, get over there, travel, go to exhibitions and exhibit your products. For heaven's sake, do not sit on your backsides and moan about the


recession." They will pull their companies out of recession by going abroad, and that could give them the lead in some sectors of world markets.
I have always had a simple approach to economics. I am not an economist and have never pretended to be one. I have a simple formula—the "what if" formula. We must consider what would happen if the German economy went into crisis and the exchange rate mechanism had to be put in abeyance because of the devaluation of the mark and the franc. I do not wish that on anyone. I believe in the ERM, I want it to work and I want Britain to get back into it. It is the way forward. However, it is always important to ask the question: what if?
What would happen if the improvement in the United States economy failed? What if our manufacturers do not match up to our expectations that they will achieve the growth to get us out of recession? What if we have to raise interest rates to protect the recovery? Heaven knows that that is the one thing that we do not want to do. What if our privatisation proceeds do not match up to the anticipated targets?
That all sounds pessimistic, but we must take into account the scenarios that I have described, because the world is unstable and full of uncertainties. The collapse of the Soviet Union and the colossal changes in eastern Europe, where economies are struggling to get on to their feet, coupled with America's huge debts, have created an international problem which we cannot escape.
As my right hon. Friend the Member for Shropshire, North (Mr. Biffen) said, we could be sitting on an inflation bomb and I echo what was said by the previous speaker—

Madam Deputy Speaker: Order. Mr. Austin Mitchell.

Mr. Austin Mitchell: Like the Chancellor, the autumn statement is clever, but pretty limited. It does not restore the damage done by the Government to the economy during the past three years of massive deflation, but merely stops the damage from getting worse. That is all that the Government have done—they are trying to alleviate their self-administered damage.
The Prime Minister told us at the Mansion house that the Government meant what they said about manufacturing—presumably, just as they meant what they said about the exchange rate mechanism and no devaluation. With this Prime Minister, one must not look at what he does, but at how he says it. Unfortunately, although he says that the Government mean what they say about manufacturing, that cannot be true, judging from the figures in the autumn statement.
Manufacturing output was down by 4·5 per cent. last year, is down by 1 per cent. this year, and is forecast to increase by only 1 per cent. next year. However, at the same time the volume of imports—most of which will be manufactures—is forecast to rise by 7 per cent. As the volume of exports is also forecast to rise by 7 per cent.—just over 30 per cent. of which will be manufactures—it follows that all of the 1 per cent. increase in production will go into exports. There will be a fall in the proportion of demand on the domestic market supplied by British manufacturing.
On those figures, we shall sell less on the domestic market and import penetration will increase, and that is the essence of our problem. Unlike every other economy, we have not increased manufacturing production from 1973 levels. There has been a huge expansion in demand since then, but it has been supplied not by British manufacturing industry but by imports, which have quintupled during that time. That quintupling of imports—based largely on the fact that our export prices and terms of trade are 36 per cent. worse than they were in the early 1970s—was essentially due to the price mechanism, because imports were cheaper, and it has been the cause of the destruction of jobs in our economy. Since the early 1970s, we have lost 3·5 million manufacturing jobs—a greater decimation than that in any other competing economy. Since we joined the ERM, 600,000 manufacturing jobs have been lost, and so the decimation has continued. We cannot get that ground back, or widen and deepen the manufacturing base, unless we win back those markets and redress the competitive terms against imports. Those terms have gone badly wrong since the early 1970s. It is because of them that the import share of our domestic market, according to the most recent published figures of 1989, stands at 37 per cent.—double the proportion in Germany and France. Obviously, that import penetration is so bad that the Government stopped publishing the figures, because we have had none since 1989.
Imports also constitute a third of our exports; that proportion has trebled over the past 20 years. Two cars exported today make a smaller contribution to our balance of payments than did one car exported in 1970. That is the heart of our problem, but the autumn statement has done nothing to tackle it.
We must change expectations and that means that we must opt for a far greater devaluation than the current one. In fact, we have not really had a devaluation. Everyone talks about it, but we have had only a 14 per cent. change in the nominal rate, which does not take us back to the real exchange rate of 1986. We have still not returned to the level of competitiveness achieved then. We have simply cut off the peaks in the overvaluation caused by the Government's interest rate policy of the late 1980s and hardened by the terms of our ERM entry. We have not returned to a competitive exchange rate, but unless we do, we cannot regain our lost jobs and markets. It is much more difficult to win markets back once they are lost. The exchange rate needs to fall by a further 10 to 20 per cent. before we can win back the lost ground.
Since we need expansion and the autumn statement does not offer us very much, we must ask from where that expansion can come. Demand is deficient, so there is nothing else to do but expand that demand. One man's spending is another man's income. If we follow the good old Keynesian principle that dictates that when demand is deficient, one must expand it, we must expand demand and channel it to domestic production.
With so many people in debt traps, house prices still likely to fall and incomes restrained by deliberate Government policy, expansion will not be created by consumer demand. It will not be created by Keynesian stimulus, because that is not provided for in the autumn statement. I would spend much more on public works projects than on housing and when asked where that money would come from, I would answer with the question, "Why fund the debt?" Why are we not


monetising the debt? Why not get ways and means advances for the Treasury from the Bank of England, as happened in war time, and expand demand that way?
We should remember that the banks enormously expanded the money supply and credit supply in the 1980s, but that they are now contracting those supplies. Why should the banks be able to damage the economy in that way when we could remedy the deficiency, and expand demand and the money supply by using public credit, the credit power of the state? Why should we not monetise the debt? The use of public credit would be simple compensation for the damage caused by the banks now that they have contracted the money supply.
Any expansion in demand certainly will not come from exports, given that the overseas markets are so depressed and that the rate of devaluation still has some way to go. Expansion can come only from import substitution. We must replace imports, which have taken such a large share of our market, with domestic production. That is the easiest, quickest and most effective way in which to expand the economy. To do that we must use the price mechanism, which means that the terms of trade for domestic production must be redressed in its favour and against exports. We must use the price mechanism, through greater devaluation, to make imports dearer.
It is no use the Government thinking that they can get away with just a marginal increase in import prices. After the 1967 devaluation those prices went up by 16 per cent. and they must rise substantially now. The fact that Volkswagen and Ford have increased their prices by only 2 per cent. shows that we have not yet achieved that substantial, necessary increase in the price of imports to make domestic production competitive enough to change expectations.
We must channel investment into that domestic production and we must keep it there. To attract investment, industry—capitalism—needs the prospect of profit. Therefore, we must have a competitive exchange rate and that competitiveness must be sustained for a long time so that expectations change and generate investment. In that way production will increase, which is necessary if we are to enlarge our industrial base. We cannot consume unless we produce. It is the production failure, which has continued for years but which was heightened by the Government's policies in the 1980s, that has caused all our problems.
We need a far greater devaluation than we have had and interest rates must be brought down to zero in real terms to bring the pound to a competitive level. In that way we can change expectations, stimulate investment and generate that into domestic production. In that way we can displace the imports that account for such a large share of our market. We are faced with huge problems, but the autumn statement does nothing to solve them; it simply repairs some of the damage that the Government themselves have done to the economy in the past three years through excessive, stupid, unnecessary and damaging deflation. The Government have sought to make good their own deficiencies, not to provide for the future of our economy.
We are at a turning point. Unless we begin to expand our industrial base we shall shrink into a declining, peripheral economy, increasingly dependent upon Europe. It is only by going ahead with a more competitive exchange rate and expansion of the economy that we can rebuild that economy and fight back.

Mrs. Judith Chaplin: I welcome the Chancellor's autumn statement and I particularly welcome his proposals to introduce private sector funding into the public sector. We all know from our constituencies of construction projects that should be completed. We all know of the unfortunate spare capacity in the building industry and of the many unemployed building workers. It is essential that those two factors are brought together. The Opposition bring them together by suggesting a great increase in public spending on capital projects. Those of us who are worried by the scale of public spending and by the size of the PSBR welcome the attempts to increase private sector investment for public sector projects.
The proposals in the autumn statement represent the third attempt by Treasury Ministers to overthrow the famous Ryrie rules. They were formulated in 1981 following concern that nationalised industries were unable to attract private investment. Those rules effectively always put the private sector at a competitive disadvantage because it could never borrow money more cheaply than the public sector.
In 1988 there was an attempt to revise the Ryrie rules to take into account the fact that there were no longer quite so many nationalised industries and the introduction of various new forms of private sector involvement. Unfortunately, the 1988 revision retained two fundamental principles of those rules. First, that private sector finance could be introduced only where it offered gains in cost effectiveness. Secondly, privately financed projects for public sector programmes had to be taken into account in the total Government spending on public sector programmes. Once again those principles effectively deterred private sector construction companies from investing in public sector projects.
In 1989 the then Chief Secretary of the Treasury, now the Prime Minister, announced in a speech to the Institute of Directors in Glasgow that he was "retiring" the Ryrie rules. He said that he would not seek, on a scheme-by-scheme basis, to offset privately-financed projects. In other words, he allowed additionality. Shortly afterwards that policy was set out in the Green Paper, "New Roads by New Means". The Treasury officials fought back as always because it was almost immediately pointed out that the Government would take account of the total provision even though they would no longer take account of each scheme. The Ryrie rules, which had been revised and then retired, had certainly not lain down and died.
I very much welcome the Chancellor's third attempt and hope that it will succeed this time. I urge Treasury Ministers not to be deflected again from getting private sector money into public sector projects. I welcome my right hon. Friend the Chancellor saying that any privately financed project that can be operated profitably will be allowed to proceed. I also welcome the Government's active encouragement of joint ventures.
In his autumn statement, my right hon. Friend the Chancellor mentioned such schemes as the east-west crossing and the Birmingham orbital road, but I hope that schemes will not be confined to large transport schemes. For example, my constituency of Newbury needs a community hospital. Why cannot that be built by the private sector and then used by both the public and private sectors? Why cannot school facilities, such as sports and


catering facilities, or badly needed nursery facilities, be provided privately and then used jointly? Why do we not allow grant-maintained schools to borrow against their assets to fund projects needed to improve the schools? I hope that small as well as large schemes will be allowed to go ahead.
I hope that every Government Department will now be encouraged to consider how the private sector can be involved in improving the whole of the country's infrastructure. I particularly hope that Ministers will ensure that the Treasury does not obstruct that happening. They should see how the whole process can be speeded up and the cost of tendering reduced so that many companies, not just large ones, can deal in that area. Furthermore, I hope that the Government will encourage the banks to look kindly on such schemes and support and assist the process.
The proposals in the autumn statement could be the start of utilising the private sector and using private sector funds to improve the whole nation's infrastructure.

Mr. Geoffrey Hoon: I listened with interest to the speech of the hon. Member for Newbury (Mrs. Chaplin) but was just a little surprised not to hear her mention the exchange rate mechanism, which was, after all, the cornerstone of the Government's economic policy throughout the time when she was special adviser to successive Chancellors of the Exchequer and head of the Prime Minister's political office. That is one illustration of a series of U-turns or S-bends about which we have heard so much lately.
There have been fundamental changes in Government policy. One day, policies have been firm and unalterable, only to be abandoned the next in a series of embarrassing climbdowns and reversals.

Mrs. Chaplin: I understood that the Labour party favoured balanced exchange rates. I have certainly not moved away from hoping that we shall return to the exchange rate mechanism when there is appropriate convergence.

Mr. Hoon: I am delighted to hear that and I hope that the hon. Lady uses her influence on Treasury Ministers to encourage them to do the same—and quickly.
Those climbdowns and reversals show that the country has what I would describe as a corkscrew Chancellor, who slides around in circles that spiral ever downwards to a point where, like the fading smile on the face of the Cheshire cat, the Chancellor's credibility disappears for ever.
The autumn statement showed an economic policy that is trying to be all things to all people, facing all ways at once, boosting a bit of the economy here, battening down the hatches there, unable to decide which way it wants to go. Having previously set out on a series of different policies, the Government have abandoned them when they proved to be the wrong routes. They now seem to have returned to where they set out, drifting from one economic rock to another without a coherent guide or strategy.
The direct consequence of this deepest and longest lasting recession since the second world war is clear. Since the third quarter of 1990, we have seen 1·25 million people

out of work, 110,000 business failures, 140,000 homes repossessed, a 4 per cent. fall in output, a 7 per cent. fall in manufacturing output and a 30 per cent. fall in manufacturing investment. It gives me no pleasure to say that the United Kingdom is firmly at the bottom of the European league for growth, job creation and investment.
The cause of that is a Government who lack a coherent economic policy. They have no idea of what they are in for. They can give us a long list of what they are against, but no clear statement of what they now believe in. For example, we know that they do not believe that they can spend their way out of the recession, because the Chancellor keeps repeating it like a mantra. I presume that we can conclude that he believes that consumers can spend the country's way out of the recession. If that is the Government's approach to growth, it is based on a fundamentally flawed perception of what is currently wrong with the British economy.
Our economy is in recession because previous Government economic policies have caused widespread redundancies and lay-offs. The fear of unemployment explains why the economy remains in recession. That threat of unemployment hangs over almost every family in the country. People have no confidence in their future—no confidence that they will be in work next week, next month or next year, that the Government's economic policies will guarantee their future, or that lower interest rates will revive their own economic circumstances.
Although everyone welcomes a reduction in interest rates, there is no evidence that it will necessarily restore the confidence that is so crucially lacking in our economy. Interest rates in the United States have been at around 3 per cent. for some time now and there is no consistent indication that it is restoring confidence in the American economy or that it has resulted in real and sustainable growth. What is happening there is a good indication of what is likely to happen here.

Mr. Jonathan Evans: Does not the hon. Gentleman's point show the fallacy of the argument put forward by the Labour Front Bench for so many months, persistently calling on the Government for just one more reduction in interest rates? Surely the example of America shows that low interest rates are not the answer.

Mr. Hoon: If the hon. Gentleman will have a little patience and if you, Madam Deputy Speaker, will allow me to continue a little longer, I shall deal with that point. It is not simply a question of reducing interest rates. Clearly, we must also have a coherent industrial strategy to accompany it.
When people in the United States were faced with lower interest rates and had a little more money in their pockets, they chose to pay off their debts—to reduce their credit card obligations and mortgage repayments and to pay off their hire purchase commitments. People lack confidence because they are frightened for their jobs so they are reducing their expenditure so that their commitments are fewer in the event of those jobs disappearing.
The extent to which house buyers are discouraged from buying property when they cannot confidently say that they will be able to meet their repayments next week, next month or next year is the primary cause of the difficulties in the present housing market and a clear indication of lack of confidence. Who will buy an asset like a house


when they cannot be sure that they can meet the continuing repayments or, more importantly in the present atmosphere, when they can be sure that the value of that asset will go down?
In this country we are paying for the cost of unemployment, not only in increased benefit payments to the unemployed and lost tax revenues but, crucially, in the light of the autumn statement, we shall also pay through a substantially increased public sector borrowing requirement. That PSBR is estimated to rise beyond the £44 billion projection. How do the Government propose to raise the necessary £44 billion or more? All the signs are that there will be insufficient domestic institutional funds to purchase gilts made available by the Bank of England. That means that the Government will be dependent on foreign investors buying pounds.
With the Government's reluctance to return speedily to the exchange rate mechanism, will foreign investors be willing to invest in sterling on such a scale, particularly given the likely continuing devaluation of the pound? Why should foreign investors invest in pounds that are falling in value? The only way of persuading those investors to do so is to adopt the course taken by the Government in the past: to offer a premium on interest rates and offer higher interest rates than can be obtained elsewhere to offset the currency risk of investing in devaluing pounds.
Such a policy will mean higher interest rates not only for foreign investors, but for the whole of the British economy, which will force this country's economy back into the vicious circle of interest rate rises, further unemployment and repossession of homes. Is that what the Government want? Do the Government want to pursue the policies of previous Conservative Governments that depended on a sustained and persistent devaluation of the pound—allowing the pound to fall steadily on international markets—as a substitute—and here I am tackling the issues raised by the hon. Member for Brecon and Radnor (Mr. Evans)—for tackling the underlying problems of the British industrial economy? Those problems include the lack of investment, training and competitiveness.
Devaluation will inevitably feed inflation into the economy. There was a 2·5 per cent. rise in factory input costs between September and October. That 2·5 per cent. rise has been directly attributed to the costs of devaluation. It will be a continuing contribution to inflation in the United Kingdom, will add to and exaggerate the already chronic balance of payments deficit, and exert still more devaluation pressure on the pound.
If the Government believe that consumers can buy this country out of recession, they must put in place the sort of policies that the Opposition have been advocating: a coherent industrial and economic policy.

Mr. Barry Legg: Like other hon. Members, I welcome the autumn statement and the excellent speeches that we heard from my right hon. Friend the Chancellor of the Exchequer last week and today. They contained many sentiments that all Conservative Members can heartily endorse, including the commitments to firm control of public expenditure and to reducing public expenditure as a proportion of national income.
The autumn statement also set out again some vital strategies. My right hon. Friend the Chancellor said that one of the Government's priorities was to make markets work better, as that will enable us to achieve a higher long-term growth rate. My right hon. Friend also restated the well-known truth that Governments cannot spend their way out of recession. There can be no stronger proof of that than what has happened to the projections of the borrowing requirement for the coming year—1993–94—and the borrowing requirement projections for this year.
The projections for the current year have risen from about £19 billion at the time of the autumn statement last November to an estimated figure in the Budget this year of £28 billion, which took away the breath of many hon. Members. Last week we were given a revised estimate of £37 billion. The borrowing requirement for the current year—the estimate of how much the Government will spend in excess of taxes—has increased by no less than £18 billion.
If Opposition Members are right in their assumption that Governments can spend their way out of recession, we should have expected growth projections to be moving forward rapidly, and should now have an overheated economy. However, the reverse has happened. The projections of growth for the current year have fallen from 2 per cent. positive at the last autumn statement to 1 per cent. negative in the current autumn statement. There can be no better proof that Governments cannot spend their way out of recession.
How are we to get out of recession? I was pleased by what my right hon. Friend the Chancellor told us. He said that the main means of ending recession were through the supply side and through monetary measures—easing monetary policy. His autumn statement contained the fact that we now have a new monetary framework, under which British interest rates will be determined by domestic conditions. That is to be heartily welcomed after our experience in recent years, when we first shadowed the deutschmark and then became a formal member of the exchange rate mechanism.
My right hon. Friend the Chancellor has rightly stated that monetary policy was too tight during our membership of the ERM. We now have an opportunity to set a sensible framework for the future to produce growth in the British economy and deliver the sort of economic results that all hon. Members wish to see.
Many hon. Members have spoken of the immediate measures contained in the autumn statement. I shall spend a little time looking at the medium-term prospects, and the ways in which we are to regenerate the economy in the medium term. My hon. Friend the Member for East Lindsey (Sir P. Tapsell) made many sensible comments about Britain's trading relationships, but I do not agree with his judgment that management of the economy has to be left to the day-to-day judgments of one or two individuals. One of our mistakes in the late 1980s was to run the economy in that way, and we did not put in place an established framework or the institutional changes necessary to ensure that our policies were properly implemented.
My right hon. Friend the Chancellor said today that the aim for public expenditure for the coming three years is to ensure that it is less than the long-term growth rates, which are thought to be about 2·5 per cent. He has set out a strategy for growth in public expenditure over the next three years of 1·5 per cent. per annum in the Government's


public expenditure control total. That is a tough target and promises an even tougher spending round in coming years than in recent ones.
The spending round that we have just experienced has provided for 4·5 per cent. growth in public expenditure, which is quite a high percentage. If one considers the future and the plans in the autumn statement, one sees that public expenditure growth will be considerably reduced—to about 1·5 per cent. Like many other hon. Members present, I believe that it is essential to fulfil those plans. All too often, previous autumn statements have contained tough spending plans for years two and three that have not been fulfilled. However, we must keep to our spending plans as the consequences for the British economy for not doing so would be very serious.
We are starting with a budget deficit as a proportion of gross domestic product of about 7 per cent. If public expenditure does not remain within the planned total it will create serious difficulties for our future funding requirements, for long-term interest rates—which have an important bearing on the wealth-creating sector of the economy—and it would have serious consequences for our taxation policies and the Government's commitment to low taxation. Sticking to those spending plans presents a great challenge.
The Chancellor has said that British interest rates will be set according to domestic monetary conditions. I welcome that. A letter dated 8 October from the Chancellor to the Chairman of the Select Committee on the Treasury and Civil Service sets out the conditions for returning to the ERM. The most important of those is that British and German monetary conditions must converge. However, it would be a mistake to return to that mechanism only because of that. We should return to the ERM only when the British and German economies are totally synchronised and working in exactly the same cycles, and, given developments in the German economy over the past two or three years, I can see little possibility of that happening in the foreseeable future.
For many years the German economy was the anchor at the centre of Europe, but that is no longer the case. It has considerable difficulties that will take many years to correct. A hasty return to the ERM would damage the British economy, and fulfilling a legal commitment to return to it and making our economy converge with that of Germany could threaten to capsize the British economy.
I welcome the Chancellor's proposals for a more open approach to financial management. He announced plans for a panel of independent forecasters who will meet once a quarter to discuss the outlook for the British economy. That is welcome, but I do not think that it goes far enough. We should consider institutional change to our economic management. Countries with the best records on their economy and on maintaining low inflation have a much more open system. In the United States the minutes of the open market committee of the Federal Reserve are freely available and in Germany there is constant dialogue between the Bundesbank and the markets. That country also has a panel of independent advisers offering open advice.
Institutional change is appropriate in the fight against inflation and the battle to create sound money, which lies at the heart of the Government's economic policy, which

I thoroughly endorse. There are two dangers to such a policy. The first is a large fiscal deficit, and some of the projected deficits are large. Such deficits will tempt future politicians to print money to bridge the gap. The second threat to sound money is over-tight monetary policy. Such a policy was followed in the early 1930s and the reaction that followed harmed the post-war British economy. We have had a period of tight monetary policy when we were in the exchange rate mechanism, but we should now pursue the appropriate monetary conditions to redress that.
We must consider not only lower interest rates but the Government's funding policy. Underfunding the deficit is supported by many monetarists and is the policy adopted by monetary institutions as strong as the Bundesbank and the Federal Reserve.
The autumn statement has many sound features, but in the years ahead we shall need to add further building blocks. If we do that, we shall recreate the spirit of enterprise.

Mr. Gordon Prentice: My constituency has a greater percentage of people employed in manufacturing than that of any other hon. Member. I shall return to that. The Chancellor said that the autumn statement is all about confidence, but people in my constituency and elsewhere will see it for what it is—a confidence trick. There have been so many promises of recovery and so many false dawns that nothing that the Chancellor says will ever be believed. On 4 September my local paper, the Lancashire Evening Telegraph, carried the headline:
Ingenious step to head off a crisis.
The story below that headline read:
Of all the options open to Chancellor Norman Lamont to defend the pound, his move yesterday to borrow £7·25 billion in foreign currency to be sold for sterling is the most innovative. Certainly the City hailed it as ingenious …Now, with Mr. Lamont's cash-pot, sterling has been provided with a buffer lasting until next March. By that time the long-delayed signs of upturn in the United Kingdom economy may have emerged to strengthen confidence in the pound.
The hundreds of thousands of people who read that major regional daily must wonder when the recovery will come. Having been once bitten, the Lancashire Evening Telegraph will be twice shy.
The Government's economic policy is all about ingenious steps, three-card confidence tricks and misrepresentations. Despite the Conservative manifesto and solemn pledges at the general election, much has been concealed from the electorate. The manifesto did not mention pit closures and the fact that 31,000 miners and 70,000 people in ancillary industries would be thrown out of work. It did not mention devaluation, the billions of pounds thrown at speculators on 16 September and the continuing slump. On the contrary, the manifesto promised recovery. The Prime Minister told people to vote Conservative on Thursday 9 April and said that the recovery would continue on Friday.
The Chancellor said in his speech that the autumn statement is all about controlling public sector pay. That means that people in the public sector are being asked to pay for the Government's mistakes. The low-paid will also suffer. My constituency is a low-wage area in a low-wage region. Today's debate comes hard on the heels of the debate yesterday on the abolition of the wages councils—an obnoxious policy but a fitting one for the


Government and just what one would expect. The Government's message is that to help recovery people must accept lower wages. They did not bat an eyelid when Valiance in British Telecom and other captains of industry in the privatised utilities were awarding themselves stratospheric pay rises. Those salaries were supposed to signal the spirit of free enterprise. Then, on Tuesday, at the Lord Mayor's banquet, the Prime Minister had the gall to talk about fairness. When did he learn about fairness? Why did it take it him so long to discover it? That will not wash. My constituents and millions like them will be worse off and calls to sacrifice by the Prime Minister will fall on deaf ears in Lancashire, where 5 per cent. of all adults earn less than £120 per week—talk about a wages council minimum—and almost 10 per cent. of women earn less than £120 a week for a full working week.
Those are sweatshop rates of pay, and those are the people whom the Tories want to accept lower wages so as to bail out the Government. The poorest are being called on to make that sacrifice. We know what brought this about. The Government strategy is to compete on wage rates rather than to develop skills. That is why the autumn statement cuts the training and employment budget even further, with youth training and employment training facing a real cut of 3 per cent. The Government's message is "leave it to the market."
We get all these lectures about competitiveness and measures to make the economy leaner and fitter, but no one buys that. No one believes that stuff any more, not coming from them, after two recessions in a decade and one third of manufacturing industry being wiped out. In the north-west of England, where my constituency is, 37 per cent. of manufacturing industry has been wiped out by the Tories.
Despite all this, the Chancellor wants confidence. He says that that is what will pull us through. If he tells that to the people in my constituency, where bankruptcies are running at record rates, home repossessions have never been higher and high unemployment is now endemic, they will laugh. We have the highest unemployment for five and a half years. For 30 months in a row, unemployment has relentlessly risen. Unemployment in my constituency is 72 per cent. higher than it was when Major became Prime Minister in November 1990.

Madam Deputy Speaker: Order. It is not the custom of the House to refer to another Member by his name. Furthermore, when the Speaker or Deputy Speaker rises, the hon. Member being called to order must resume his seat.

Mr. Prentice: Thank you, Madam Deputy Speaker. You will gather that I feel strongly about this issue.
Ordinary people will pay for the mistakes of the Conservatives. I see Tories snigger. They will probably find some way to twist the issue of Government borrowing. The PSBR of £44 billion comes from a party that in April told the British people that the implementation of the Labour party's manifesto commitments would cost £35 billion. Government borrowing will be running at a rate of £1 billion a week next year with a need to finance maturing Government debt. All this borrowing is to pay for unemployment and to generate growth of 1 per cent. Where will the growth come from? It will not come from our manufacturing industry because Britain does not make things any more.

Mr. Geoffrey Clifton-Brown: Rubbish.

Mr. Prentice: Is it rubbish? Work on civil airlines has been transferred from Hatfield to Taiwan. They should tell people in Hatfield about the transfer of technology.

Mr. Clifton-Brown: What about our balance of payments surplus in cars for the first time in 15 years? The hon. Gentleman is wrong to say that we do not make things any longer.

Mr. Prentice: I agree that there has been an improvement with cars, but that is generated by Japanese companies, not indigenous United Kingdom companies. What about consumer durables such as washing machines? What about shipbuilding? Can Tory Members find something to laugh about a shipbuilding industry that has plummeted? What about cameras? Can they laugh about the motorcycle industry, the bus industry or the textile industry, which used to be so important in my constituency, which have all been wiped out? The last pit in Lancashire, Parkside, is about to close. Are they going to laugh at that? What about British Aerospace, in which 132,000 jobs nationwide, and 40,000 in my area, are threatened? If that goes, my region faces economic annihilation and the erosion of its skill base. No doubt they will still find something funny about that.
If we lose leading technologies such as aerospace, from where will the new jobs for my constituents come? We have accelerating job losses, falling investment, empty order books and a flattened housing market. We need a programme for growth and long-term investment—something that we are not getting from the Government. The north-west needs a Government who are seriously interested in manufacturing industry, but no one believes that the autumn statement measures up to the task ahead.

Mr. Rod Richards: The Chancellor's autumn statement has quite rightly been widely welcomed. I endorse what my colleagues have said about it. The welcome is quite simply because it is appropriate for the new circumstances in which we find ourselves, and because the measures it introduces are imaginative. Most of all, it is because the autumn statement is fundamental to building confidence. It describes the Chancellor's economic framework in a way that allows everyone to see clearly his targets and the indicators that he will use to ensure that he attains those targets. The Conservative party has confidence in its Chancellor.
Having heard the shadow Chancellor this afternoon, I feel that Opposition Members might want to reassess their view of his policy. It was revealing that he did not have a good grasp of economics. He drew attention to the fact that one of the measures in the autumn statement was abolishing car tax. He rightly quoted the figure, used by the Chancellor, of a cost of £750 million in the fiscal year 1993–94. That works out at approximately £400 per average family vehicle.
The shadow Chancellor then took the motor manufacturers' forecast of an increase in sales of vehicles of 70,000. Any average GCSE pupil would have told the shadow Chancellor that 70,000 vehicles costing the Exchequer £400 each would result in a cost of £28 million, less VAT. However, the hon. Gentleman did not make


that computation. In the topsy-turvy world of Labour's "think of a number" policy, he took the Government's cost forecast for the total spend, divided it by the motor manufacturers' extra cars sold forecast, and came up with the cooked answer that every vehicle would cost the Exchequer £10,500. He forgot to mention that almost 2 million car owners will have an extra £400 each to spend, thereby creating demand and boosting the economy.
I know that the hon. Member for Dunfermline, East (Mr. Brown) was once employed as a temporary lecturer at Edinburgh university, and I can understand why it did not offer him a full-time job. His speech proves that Labour cannot be trusted to get its sums right with the taxpayer's money.
I particularly welcome the £6·3 billion settlement for Welsh programmes and the fact that its real value will be maintained for the next three years. I congratulate my right hon. Friend the Secretary of State for Wales on retaining the population-based formula for calculating public expenditure provision. Long may that practice continue.
My right hon. and hon. Friends and I recognise that the recession is global and therefore that any Government's actions are limited. However, Government policy has brought considerable success to Wales over the past 13 years, so the effects of the recession there have been less severe than in the rest of the United Kingdom. At present, 10 per cent. of the potential working population of Wales are unemployed—which reflects almost exactly the figure for the rest of the United Kingdom. In 1986, the comparable figures were 14 per cent. and 11 per cent.
Wales has caught up with the rest of the United Kingdom because its economy has been completely transformed over the past 13 years by Government policy. The basis of the Welsh economy is now much broader than in 1979, when a Conservative Government came to power, when coal and steel were virtually the Principality's only industries. That transformation occurred through the effective use of public funding of inward investment.
Since the general election, my right hon. Friend the Secretary of State for Wales has announced the creation of 3,000 new jobs and that 800 others would be safeguarded, reflecting investment of £78 million and a Welsh Office contribution of selective regional assistance valued at £20 million. To save the shadow Chancellor tripping his fingers over his calculator, that produces a cost of £5,260 for every job created. I am pleased, therefore, with the increase in investment capital allowances, which can do nothing but good for investment prospects for Wales.
The self-employed and small businesses account for the bulk of the Welsh economy. The autumn statement is about confidence, and that is precisely what has been lacking among small businesses in Wales and the rest of the United Kingdom. Inflation poses the greatest threat to confidence, and my right hon. Friend's means of achieving his inflation target are boosting confidence. However, expectations of future inflation tend to be self-fulfilling and to generate their own inflation.
The biggest boost to confidence among the self-employed and small businesses was sterling's withdrawal from the exchange rate mechanism on 16 September. Those to whom I spoke displayed unbridled joy at that development, and the subsequent lowering of interest rates

meant that many more small businesses will survive the recession. I hope that my right hon. Friend the Chancellor will lower interest rates again when it is prudent to do so.
Having raised the matter of the exchange rate mechanism, the shadow Chancellor and his right hon. and hon. Friends persist in saying that sterling should have been realigned a week or a fortnight before 16 September. I put the question to the Chancellor this afternoon, and I really would like an answer. If the Opposition really believe that the ERM should have been realigned at that time, will they kindly tell the House what, in their view, the central value of the realignment would have been, and what would have been the appropriate base interest rate for that value?
I accept the discipline that the ERM forced upon this country, but now that we are out of it, let us take full advantage of the opportunity. I congratulate the Chancellor on taking the first major step along the road to recovery.

Dr. Roger Berry: Earlier, reference was made to a letter signed by several hundred economists in 1981 that was critical of the Government's economic policy. I plead guilty to being one of its signatories. I am not at all embarrassed, given that Conservative Members have spoken this afternoon as if, since 1979, the Government have not had the worst record of economic management of any postwar Government.
The Government have the worst record on growth, unemployment, interest rates, the balance of manufactured goods, and so on. The list is endless. I looked in the autumn statement for remarkable features and for something new. It makes a half-hearted and belated attempt to adopt policies that the Government ridiculed and rejected not only before and during the general election but in the seven months since. They rejected lower interest rates, tax allowances for investment, additional export credit assistance, and the release of local authority capital receipts.
In my maiden speech on 10 June, during the debate on the Finance Bill, and on a Labour amendment calling for enhancement of first-year capital allowances that was rejected out of hand, the Financial Secretary to the Treasury said:
The facts do not support the assertion that capital allowances increase the flow of investment".
He said that the amendment was aimed at generating an investment-led recovery.
but history has shown time and time again that investment led recoveries are chimeras."—[Official Report, 10 June 1992; Vol. 209, column 357.]
The Financial Secretary followed the lead set by the Chancellor in presenting his Budget, when he also rejected enhanced capital allowances on the basis that they would not be a sensible use of available resources.
Last Thursday, the Chancellor increased allowances for first-year investment in plant and machinery. There has been much ill-informed talk about investment led recovery, and that was one change of policy. The most dramatic change followed the lengthy call for a reduction in interest rates. A Treasury press release issued last week spoke of the lowest interest rates since 1978. What happened after 1978 to give us record interest rates? The truth is that the present Chancellor and his predecessors


have been responsible for precisely the record interest rate levels that the Chancellor now seeks to claim credit for reducing.
It must be quite easy to be a Chancellor of the Exchequer in such circumstances. You jack up the interest rate; you wait for a few months; then you bring them down, and everyone says how wonderfully you have done your job. No doubt some Conservative Members are impressed by such tactics.
In the autumn statement, the Chancellor proclaims the benefits of a devalued pound—he refers to it, of course, as a competitive pound—and the lower interest rates that that allows. There is, however, no hint or whiff of recognition of the fact that this is the same Chancellor who resisted such a policy until it was forced on him; the same Chancellor who was prepared to borrow £7 billion to throw away more than £1 billion of taxpayers' money in a vain and foolish attempt to prop up an overvalued pound. There is no recognition of the fact that the right hon. Gentleman not only raised the interest rate to 15 per cent. on 16 September, but subsequently told the House that he would have kept it at 15 per cent. if the policy had worked.

Mr. Jonathan Evans: The hon. Gentleman said that he considered the pound to be over-valued at its then rate in the exchange rate mechanism. I seem to recall that, during the general election campaign, the Leader of the Opposition suggested that the Labour party would defend that valuation. Did the hon. Gentleman say then that he considered the valuation too high?

Dr. Berry: I pointed out that it was too high on the very day that we entered the ERM; it seemed reasonably obvious. My right hon. and learned Friend will speak for himself, but I am convinced that, if he had expressed the view that I now hold in the run-up to the election, he would have been held responsible for the devaluation in the currency. Indeed, incredible though it may seem, I have heard hon. Members in the Chamber trying to blame him for precisely that—although, as the hon. Member for Brecon and Radnor (Mr. Evans) has said, he did not express the view about the devaluation of sterling that I am now expressing.
The point is that, if the Chancellor's policy of jacking up interest rates to 15 per cent. had succeeded in maintaining the pound at DM2·95 in the ERM, we would be debating a slightly different autumn statement. However, millions of people in the country would be seriously worried, and rightly so. On reflection, I believe that that would have been a preposterous proposition—but, according to the Chancellor, it is what he would have done.
One feature of the autumn statement is its acceptance of some of the arguments advanced by Opposition Members and others. Today, people are talking about the awarding of marks to schools, and about league tables. I would like to award marks for economic literacy to the autumn statement—I would not give it many. First, why start with a planning total of £244·5 billion when the circumstances in which that total was set last year have changed so radically? The dramatic recovery to which the Chancellor referred last year has signally failed to materialise, and there is no economic rationale for sticking to a figure when it is out of date.
Secondly, why assume that improved confidence—a phrase that is used repeatedly throughout the autumn

statement—will miraculously follow interest rate reductions, when the private sector is debt-ridden on an unprecedented scale, and unemployment is still rising? Thirdly, why continue to assert that conquering inflation—whether that is interpreted literally as the achievement of zero inflation, or more liberally as achieving any old rate between 1 per cent. and 4 per cent.—is the key to sustainable growth? No economic theory or empirical evidence demonstrates that; indeed, a few years ago, the Financial Times pointed out—correctly—that there was no perceptible link between the inflation rate and the rate of economic growth.
Fourthly—this annoys me most—if, as the Chancellor says in the autumn statement, it would be damaging to seek to prevent the PSBR from rising in a recession owing to the loss of tax revenues and the payment of benefits—a view with which, incidentally, I agree—why is it not better to increase the PSBR to invest in economic recovery? The statement gives no answer to that question.
As my hon. Friend the Member for Pendle (Mr. Prentice) has pointed out, at the last general election the Government made much of Labour's spending programmes; indeed, they assumed that all our expenditure on every conceivable programme would be incurred in 12 months. That would have required a significant increase in public sector borrowing—probably of the order of that the Government propose for the PSBR in the current year. The Government's wheeze has been to achieve a similar figure without any improvement in services, with employment accelerating to 3 million—according to their figure; on the bases of calculations made before they fiddled the statistics, the figure is nearer 4 million. It is difficult to imagine a more damning condemnation of economic incompetence.
That brings me to the most remarkable feature of the autumn statement. As many of my right hon. and hon. Friends have said, it fails to address the real issue: how we can secure economic recovery, and reduce unemployment and the record number of bankruptcies. Most significantly, it fails to appreciate that, without sufficient demand in the economy, unemployment will continue to rise and firms will continue to go bust.
As hon. Members on both sides of the House have pointed out, supply side policies are important. Our appalling balance of trade in the midst of recession is evidence of that. They are not enough, however; our economy's output will not be purchased unless there is sufficient demand in the economy. In my constituency, the owners of businesses are working every hour that God gives. They have made every conceivable supply-side improvement. The only thing that keeps newsagents, local garages and other small businesses in operation and secures jobs is the arrival of more customers spending more money. An increase in demand is not merely sufficient, but absolutely necessary, if the country is to emerge from recession.
The Government appear to believe that the private sector will somehow generate that increase in demand. They seem to think that consumers will get hold of their plastic cards—observing that interest rates have fallen by another point—shoot out into the high street and increase their expenditure, thus bringing the country out of recession. I believe that the Government hope and pray that that will happen, but the problem is that it will not happen.
Interest rates are not particularly low at present; and in the United States, where rates are around 3 per cent., the recession continues. The private sector in this country—whether it is the corporate sector or private consumers—is more debt-ridden than that in the United States. It is inconceivable that an interest-rate reduction will be sufficient to regenerate economic recovery: as a number of hon. Members have said, what we need is an increase in public expenditure.
I have looked carefully at the figures in the autumn statement. If we accept all the Government's assumptions about a 1 per cent. growth rate next year, and their assumptions about the components of demand arising from exports, private investment and private consumption, the fact remains that there is a yawning gap in demand. There is not enough demand even to prevent rising unemployment.
Having taken account of the knock-on effects, I believe, as my hon. Friend the Member for Neath (Mr. Hain) has said, that we need an increase of £10 billion in public expenditure to make any impact on unemployment. It should be targeted at investment in industry, public works infrastructure and construction, for three obvious reasons. First, it would use unemployed resources to create productive assets; we should be investing in projects with rates of return in excess of the cost of borrowing. Secondly, public expenditure on investment would have less of an impact on imports than the equivalent increase in private consumption, even if that could be engineered. Thirdly, such a package would immediately be self-financing in part as tax revenues rose and social security payments fell.
Conservative Members are fond of chanting the dogma that the Government cannot spend their way out of recession. That is a fatuous excuse for Government inactivity. It is incontrovertible that to get out of recession requires increased expenditure on the nation's output. If the Government will not help bring that about, who will? If there is one reason why I shall be voting against the autumn statement, it is the abject failure of Government to answer that simple question. The autumn statement is not a programme for recovery; it is not the programme that my constituents and millions of others need so desperately.

Mr. Richard Spring: May I add my congratulations to my right hon. Friend the Chancellor on presenting to the House an autumn statement which has won plaudits not only in the House but amongst many independent commentators. His emphasis on capital spending, his commitment to keeping a lid on inflation and his commitment to reviving growth have been greatly welcomed.
The events of the last four months have produced a number of instructive lessons. A financial whirlwind forced us to leave the ERM but the whole country now welcomes the cuts in interest rates since our departure. However welcome the new minimum lending rate of 7 per cent. is—hopefully with more to come—it marks a stage in a volatile roller coaster ride of interest rates—7·5 per cent. to 15 per cent. and back to 7 per cent. While I greatly welcome the Chancellor's firm commitment to low inflation, the post-war swings and roundabouts of interest rate policy have bedevilled the economy. For example, the

credit boom of the late 1980s bore great similarities to credit conditions in the early 1970s. Sadly, history has had a habit of repeating itself.
The Maastricht treaty requires during the second stage that member states should start the process leading to the independence of their own central banks. It is not clear that we would find it desirable to move towards a single currency or indeed that the convergence criteria will ever be successfully met.
I turn to the domestic argument. There is no doubt in my mind that the wave of money moving into the deutschmark this year was due to the belief of the markets that the Bundesbank would pursue policies essentially unfettered by political influence. The markets were proved right. In its policy objectives, the Bundesbank has been by and large successful.
The Bundesbank is more substantially independent than the Bank of England. That is important. The IMF working paper, "Central Bank Independence: Issues and Experience", noted that the results of most studies are that countries with independent central banks tend to deliver better inflation outcomes. Had the Bank of England been considerably more independent, over the past four decades we would have enjoyed lower inflation, a more stable currency and less volatile interest rates. Surely it is time, particularly after the turbulent experiences of the summer, to look seriously at the structure of the bank and thereby the conduct of our monetary policy.
Given the enormous and justified importance which hon. Members place upon debate and parliamentary scrutiny, there might be concern that an independent Bank of England would be unaccountable. There is clearly a difficulty, with a tension between parliamentary sovereignty and central bank independence. That needs to be addressed.
The fears of lack of democratic accountability to Parliament could be addressed if the Governor were made regularly accountable to the Select Committee on the Treasury and Civil Service. The ingredients for that exist already. The Select Committee could have an enhanced role in monitoring the bank's performance. Basic to the independent bank's charter would be an absolute commitment to stable prices. The Select Committee could examine the conduct of the bank's monetary policy. A mix of a statutory commitment to price stability and parliamentary accountability would enhance the conduct of future monetary policy.
If ever, heaven forbid, we were beset again by the same financial whirlwind that we saw in the summer, we would be better able to withstand it. I urge my right hon. Friend to give serious consideration to that proposal.
There has been a great upsurge in concern about the future of small business. The huge increase in small businesses and entrepreneurial activity in the 1980s was welcomed and was a great triumph for the Conservative Government. As is happening tragically everywhere in the world, small businesses here are being hit very hard by the recession.
My hon. Friend the Member for Colchester, North (Mr. Jenkin) very ably highlighted small business problems in the House last Friday, and in Adjournment debates my hon. Friends the Members for Langbaurgh (Mr. Bates) and for Tiverton (Mrs. Browning) dealt with specific difficulties facing the small business community.
Small businesses face a liquidity crisis despite lower interest rates. My hon. Friend the Member for Surrey,


North-West (Sir M. Grylls), with all his years of distinguished commitment to small businesses, has spelt out eloquently the lack of long-term assured capital which has been so damaging and debilitating.
Has the desire of banks to repair profitability by extending margins something to do with lack of liquidity in the banking system? In the 1980s bank credit to the private sector, which is most sensitive to interest rate changes, grew by 20 per cent. per annum. The growth of money supply in the early 1980s fell to a more sustainable 12 per cent. because of Government overfunding, that is, selling more Government debt to non-banks than the PSBR and using the excess proceeds to repay Government debt held by banks. Surely now we are in exactly the reverse position, as indicated by my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg). We need to liquefy the system by underfunding, that is, by the Government financing at least part of their PSBR from the banks. That system was in force prior to 1985 and was considered to be successful. That approach to monetary policy is practised widely in other parts of the world. The collapse of broad money growth from 18 per cent. in 1990 to 5 per cent. now suggests that greater short-term monetary expansion is called for.
May I be technical and illustrate the extent of this dire problem? In the year to the third quarter of 1988 the rise in bank deposits held by unincorporated businesses, mostly small businesses, was 28·9 per cent. In the year to the second quarter of 1992 it fell by 0·1 per cent. Small business liquidity has been severely cut at a time of recession by lack of growth in broad money. Surely, therefore, the Treasury should consider under-funding to make up for the lack of credit growth. Broad money needs to grow, to boost liquidity in the short term before levelling off in years to come. That is the real world that business—small businesses in particular—has to live in. By liquefying the banking system, the lending practices of banks would surely not be so damaging and obstructive as they clearly are at present. Therefore, I urge the Treasury to address that problem, in the face of rising business illiquidity and bankruptcy.
All that having been said, the business community in west Suffolk, in my constituency of Bury St. Edmunds and in the nation at large greatly and without reserve welcomes all the measures that the Chancellor took so boldly last week. We now have in place a strategy for new growth, which I greatly welcome and fully support.

Mr. George Stevenson: The autumn statement can rightly be described as containing very small crumbs of little comfort. It should have been about reversing our industrial and economic decline and establishing a structure for long-term growth. In reality, it continues to destroy credibility and it certainly does not hold out the prospects for an improvement in confidence. The main reason is that the Government have singularly failed to recognise that unemployment is the greatest threat to a return of confidence. Unless the Government recognise that fact, confidence—which is so elusive—will not be generated. Unless the priority objective is employment, not unemployment, we shall continue to suffer.
The Chancellor's autumn statement and his subsequent contributions contained hardly any reference to unemployment. That had to be dragged out of him by means of questions. Finally, he had to admit that unemployment would continue to rise. What a disgraceful statement to have to make after 13 years of Tory government.
The autumn statement provides official recognition of the fact that the Government's philosophy has been completely discredited. We have been asked to believe that what we have to do is to drive down pay and increase poverty, as those elements are vital to recovery.
The other element that we are asked to accept in the deadly economic cocktail with which we have been presented is chronic short-termism. We are told that increased capital allowances will be helpful to business and industry, but they are available for only one year. That is unlikely to provide an incentive to stimulate investment. What is needed is a long-term strategy, but no evidence of such a strategy can be found in the autumn statement. The Treasury's economic model makes it clear that any possible benefits from devaluation, allied to the Government's present policies and any growth, if it happens, will be short lived and quickly reversed.
The Government seem equally unable to realise that lower pay will depress much-needed domestic demand. Short-termism, incompetence and cuts in living standards will create further economic and social divisions. Apart from the damage that that does, it is irrelevant as we search for a solution to the chronic economic problems that the Government have created. As they continue to stagger from crisis to crisis, the suffering of the British people intensifies. One can detect no reasonable prospect of any reversal of the decline, let alone any prospect of the promotion of economic growth.
The Chancellor told us that he anticipates a 1 per cent. increase in growth next year. If we were to depend upon the reliability of past predictions, we should be looking at another example of an economic blind date. Any talk by this Government of growth and of an increase in jobs borders on the obscene. More than 3 million people are on the dole. The pits closure programme will lead to another 4,000 job losses in my constituency of Stoke-on-Trent. South alone. Will the Chancellor come to my constituency and explain to those 4,000 people who are to lose their jobs, how the economic miracle will enhance their job prospects?
Another bombshell is lurking in the background. The British people should be given clear notice of what is going to hit them. We can predict with reasonable confidence that the Government will be forced to increase taxes, in one form or another, in the very near future. The public should not be deceived into believing that any other prospect is open to the Government.
The autumn statement was greeted with a certain amount of euphoria by Tory Members. It occurred to me that the shouting and cheering grew in intensity as the Government's credibility fell. I do not know what is going to happen in future. I think we can expect more shouting and more cheering. However, this mini-Budget has been received throughout the country with as much enthusiasm as a sun-ray lamp would be welcomed in the Sahara. It is perceived to be irrelevant and useless.
The Government have no control over the economy. They have no commitment to economic recovery. The plain fact is that they are just not believed. The Tories have cashed in all their credibility. The biggest obstacle to the


return of confidence are the Government. They pursued dogmatic policies for so long that they caused enormous damage. The Prime Minister told us that any change in the Government's policies would be a betrayal of our future. The collapse of the Government's economic policies, however, has forced them into changing their policies.
It is impossible to believe that the country is now being asked to accept that the policies contained in the autumn statement are virtuous and that they were planned all along by the Government. That is patent nonsense.
It is clear that the only question that remains to be answered is not whether these measures will restore confidence but when—if not—there will be a further retreat by this incompetent Government. No Cabinet reshuffle, whenever that comes, will hide that fact, or con the British people.
The Government have been described as a busted flush. I do not know whether I accept that. Nevertheless, they display all the characteristics of a spare trick at a whist drive. "Trick" is the operative word. The people of this country were subjected to a tragic confidence trick at the general election.
These measures are marginal indeed. They are designed to attract more Tory cheers. They do not address the deep-seated problems that face the country. They are motivated by desperation, not by conviction, and have little chance of success. They expose the disastrous policies of a discredited Government, who have a knee-jerk philosophy that masquerades as economic policy. It is no substitute for a radical new direction based on partnership between government at central and local level, and business and industry throughout the country. We need real investment in training, real investment in business and industry, an urgent job programme and an immediate attack on mass unemployment. Only then shall we see any real prospect of a return to much-needed confidence.
My contention, which will be supported by many hon. Members in the Lobby tomorrow night, is that confidence will not return as a result of the Chancellor's package and will certainly not return while this Government are in office.

Mr. Mark Wolfson: I welcome the autumn statement because it represents a change in policy. If we had not seen that change, I would have taken a different view. The Government's previous economic policy was proving inadequate because it was based on forecasting that was clearly flawed. As evidence developed that the recession was not over, a change was urgently necessary.
It was certainly no part of my own election platform, of our party's election platform or of Ministers' election platforms that we should continue to preside over a continuing recession. This necessary change in our economic policy was clearly overdue.
Before the autumn statement and black Wednesday, the emphasis that was so heavily on the control of inflation was no longer making sense to business, to home owners or to the public in my constituency and elsewhere. It was increasingly obvious to them and to many Conservative Members that growth in the economy had to become the new and central focus. That is why, as a result of the autumn statement, we have a welcome for the policy from

the Confederation of British Industry and from the Institute of Directors. More importantly to me, the policy has got a welcome from those active in business at all levels in my constituency.
I do not recognise that there has been a gloomy response to the autumn statement, as Opposition Members have suggested. They may not like it, but my constituents and people in business who have been looking for a more hopeful and positive outlook are pleased with the results.
The measures in the autumn statement are now regarded as realistic and sensible. Those running industry and business may not have got everything that they wanted, but they did not expect to get everything. They realise that the Government cannot get the country out of recession by themselves. The Government can only take certain measures to act as a stimulus.
There is a real change in perception in the country about what the Government are now doing on the economic front. I support the Chancellor in his efforts to hold the level of public spending below the level of growth in the economy as a whole. I share the concern expressed by other speakers today about the level of borrowing. Once I had heard the Chancellor say what his borrowing forecast was for this year and for the years ahead, I no longer expected that we would get two points off interest rates at this moment. However, I hope that the downward pressure on interest rates will continue as a result of a prudent and balanced policy now.
It is entirely proper that the statement should contain a pay ceiling of 1·5 per cent. in the public sector. That leaves room for productivity arrangements and for some recognition to be given to improvements in the operational efficiency of those in the public sector. A nil increase would not have allowed that and would have been a mistake.
Clearly the emphasis on protecting capital investment and increasing capital spending is right. I welcome the emphasis on housing, on roads and on railways, and I especially welcome the commitment to build the Jubilee line extension. Concern has been expressed today about other areas of capital expenditure for London Transport. The tube strike threatened for next week is an appalling example of Luddite mentality. How can it be right to upgrade the capital investment in London's tube lines if those operating the lines are not prepared to make necessary changes to increase efficiency and, under the schemes, increase the earnings of the majority of people employed by London Regional Transport? I hope that the union will see sense and not cause unnecessary difficulties and problems for Londoners next week.
I welcome the new rules for funding public sector projects such as the joint private-public ventures. The advent of leasing arrangements will be particularly helpful for my constituents who commute to London, who are absolutely fed up with low-grade rolling stock. That proposal will provide a way forward to deal with that problem faster than before.
The ideas of charging for motorways and ultimately for electronic charging for other roads are also ways to improve Britain's infrastructure so that it can compete with the rest of the world, and particularly with Europe, without placing an unrealistic burden on public funding.
I question whether the privatisation plans for British Rail, which are very much linked to the level of PSBR and the Government's ability to fund rail infrastructure, are


likely to be really effective in their present form. Clearly much further consideration will be given to that issue in the House.
I ask the Government Front Bench, and in particular my right hon. Friend the Chancellor, to continue to focus on the importance of manufacturing industry. There is a good story to tell here. Manufacturing accounts for 50 per cent. of consumer purchases in this country and 70 per cent. of exports. It employs 5 million people directly and another 5 million indirectly.
Manufacturing industry's record in the 1980s was one of considerable progress. Output has risen by 22 per cent. and productivity by 58 per cent. from the low point in the early 1980s. Our share of main manufacturing countries' exports recovered from a low point of 7·6 per cent. in 1985 to 8·7 per cent. in 1991. Most importantly—and this point is often missed—is the fact that business expenditure on research and development rose 6 per cent. a year in real terms in the decade 1981–91. We are all well aware of the fact that industrial relations were transformed over that period.
A gap still exists of between 20 and 40 per cent., on whatever range of measures one uses, between the United Kingdom's ability in manufacturing industry and that of our major competitors. Therefore, much remains to be done. Part of the Government's policy in future should be to ensure that we put manufacturing industry at the top of our agenda, that we recognise and promote the importance of a strong manufacturing base and that that point is taken account of in every area of Government policy.
That is not to suggest that Government can do industry's job, which is to manage, sell, achieve and be profitable. However, I believe that it is important that we learn from the lessons of the past when at one stage it was said from the Conservative Benches that manufacturing industry was not as important to the country as it had been and never would be again. I want to raise the emphasis in that respect. The policies that we are now following are sensible in terms of the future of British industry. I hope that the focus on the importance of manufacturing will remain a fundamental tenet of Government policy in future.

Mrs. Helen Jackson: The Chancellor began his autumn statement by stating the three principles on which it was based. The third principle was his wish to make markets work better. However, he did not make it clear for whom he wanted markets to work better. Did he want markets to work better for the public good, for people who are working, for people who are out of work, for people who are looking for work, or for some financial institutions?
It is important to look at the fine print in documents such as the autumn statement. I was made aware of the fine print when I received a letter from the Parliamentary Under-Secretary of State for the Environment, the hon. Member for Hornchurch (Mr. Squire), only yesterday, spelling out the implications of the autumn statement for economic development in inner-city areas. The autumn statement does not reveal that the implications for inner-city areas will mean that urban programme funding is maintained, to use the Minister's word, at £176 million.
That is a decrease on this year's figure of £237 million, to £91 million for 1994–95, and virtually nothing for the year after that.
In my constituency of Sheffield, Hillsborough that means that about 200 economic regeneration schemes ranging from very small schemes such as a £300 toy provision for a mother-and-toddler library to essential regeneration projects to equip the city's media centre will finish next March unless the proposals are changed.
Let us consider the benefit of urban programmes. In my experience, 90 per cent. of urban programme funding is directly felt by people, 37 per cent. of schemes are promoted by the voluntary sector, 25 per cent. of schemes have a positive action element, and a large number of schemes have European partnership funding. The autumn statement told us nothing about how to work with European funds to obtain better regeneration.
On 2 June, in an answer to me, a Minister said that he did not expect the establishment of the urban regeneration agency to have any effect on the future financial provision for the urban programme. We continued to plan excellent schemes and projects to regenerate our economy in Sheffield. After such a statement, I did not expect to find that, at a stroke in the autumn statement, the urban programme in major cities had virtually been aborted. The excuse is that it is aborted in favour of £20 million, which is a mere quarter of the money that has been cut and which has to be matched by capital receipts this year. Have Conservative Members tried to sell a house lately? There is not an enormous market. The money will not be forthcoming. The fine print in the autumn statement will be disastrous for poorer city areas.
I urge hon. Members from urban areas to consider the detailed implications of the autumn statement and put pressure on the Government to ensure that their policies work for everybody in city areas, not just for the few.

Mr. Geoffrey Clifton-Brown: I, too, welcome the excellent autumn statement of my right hon. Friend the Chancellor. I also pay tribute to him for the two excellent reforms that he has introduced. First, he has planned an expenditure total and then worked out which Departments would have what proportion. Secondly, this will be the last autumn statement in its present form. That is a long overdue reform. In future the autumn statement will be made and tax-raising measures will be announced at the same time at the end of the year.
My right hon. Friend's planned expenditure total of £244·5 billion is a 7 per cent. increase over last year, on top of a 10 per cent. rise the year before. So any talk of cuts from the Opposition is absolute nonsense. That is why Opposition Members' comments were so empty last Thursday. All the wind had been taken out of their sails, because all the budgets had been maintained.
However, there is a danger in the planned expenditure total. It represents some 45 per cent. of gross domestic product and a public sector borrowing requirement of about 6·5 per cent. this year. If some of the forecasters are right, the PSBR could well rise to 9 per cent. in the next two years. The PSBR was zero in 1990–91, so this year's PSBR represents quite an increase. My right hon. Friend the Chancellor will have to pay careful attention to it.
In order to make the public expenditure round work, my right hon. Friend had to save some £1·5 billion by putting a curb on public sector wages. Approximately 5 million people are employed in the public sector. That has fallen from 5·9 million a year ago, and I hope that the trend will continue.
My right hon. Friend has direct control of about 3·5 million of those 5 million employees. The remaining 1–5 million are employed by local authorities. If the local authorities wish to hold their council tax to a reasonable amount and preserve their budgets, it would be very much in their interests to hold wage increases for their employees to about 1·5 per cent. in forthcoming wage rounds.
There is a great deal of talk about holding down wages in the public sector. However, public sector employees mostly have protected and generally well paid jobs. They have plenty of fringe benefits. Many of them have pensions linked to inflation. But, above all, they have a job, and in that they are an awful lot better off than people in the private sector who have lost their jobs. Surely it is right that a sector which has enjoyed real increases in wages in the past 10 years should at this stage of the economic cycle take part in the economic stringency which so many employees in the private sector have had to endure.
The autumn statement has put us well on the way to recovery. We have a reduction in the value of the pound against the deutschmark and the dollar of some 15 per cent. That will be of major benefit to our exporting companies. Much more importantly, we now have lower interest rates. They are down from 9 per cent. a few weeks ago to 7 per cent. I hope that my right hon. Friend will be able to reduce them further, to 6 per cent., before Christmas.
Even at the present rate, interest rates are at their lowest since 1978. We have lower rates than any of our major European partners. If that will not stimulate confidence and recovery in the consumer market, I do not know what will.
I and my constituents in Cirencester and Tewkesbury—especially the business men—congratulate my right hon. Friend on his measures to bring about investment in the economy next year, and on his imaginative statement.

Mr. Andrew Smith: We have had an interesting and wide-ranging debate, as befits an autumn statement which was dressed up as a mini-Budget. As the Chancellor spoke, it became clear that the statement had a great deal more to do with reviving his reputation and that of the Government than reviving the British economy. What is more, it failed on those counts. Had the Chancellor been here to listen to all the contributions in the debate, including those from his side, he would have heard Conservative Members on the Benches behind him voicing a sombre tone, which did not reflect the exuberant self-congratulation with which the Government tried to launch the mini-Budget.
The right hon. Member for Shropshire, North (Mr. Biffen), who is always an interesting, and frequently a sombre, contributor, set great store by devaluation. He and other devaluationists—including any Opposition

Members—would do well to pay attention to what the Society of Motor Manufacturers and Traders has said since black Wednesday:
there is great uncertainty at present over the future direction of Britain's economic and European policy. Inflation is still feared, the pound is regarded as unstable at its present level (which is much too low—the industry was competitive at DM2·90-£1) and there is great concern lest the industry again be subjected to taxation to help the Government fund the PSBR. A two-speed Europe would speedily negate the purpose of the foreign investment so that new capacity would replace rather than add to existing capacity".
As my hon. Friend the Member for Ashfield (Mr. Hoon) rightly said, devaluation cannot be a substitute for tackling the underlying weaknesses of the British economy.
The right hon. Member for Shropshire, North also alerted us to the "inflationary time bomb" which is inherent in the present situation. He should recognise that much of that inflationary time bomb can be traced to precisely the devaluation in which he seemed to have so much faith.
The right hon. Member for Berwick-upon-Tweed (Mr. Beith) made at least two judgments with which I agreed. First, he said that the debate on the statement is being held unusually quickly because, the longer that the country has to examine it, the more they will realise how shallow and inadequate it is. I also agree with him that it is a shameful abdication of the country's international responsibilities for overseas aid to the poorest third-world countries not to have increased it in real terms, and it is against the best traditions of the British people's feelings.
I endorse the powerful argument of my hon. Friend the Member for Newport, East (Mr. Hughes) that everything possible should be done to boost the British car industry. Welcome though the abolition of the special car tax is—like my hon. Friend, I have long argued that it should be ended—let no one be deceived: even if sales were to increase by 70,000, as the SMMT says they might, it will still leave them 29 per cent. lower than they were in 1989. Such is the depth of the recession—and, by comparison, how puny are the measures in the autumn statement.
Can the Paymaster General answer the question that he could not answer last night when we discussed the car tax? How will that £750 million be recouped from British motorists, as the Chancellor said it would be? Also, why is it £750 million, when an extra 70,000 car sales, resulting from the abolition of the tax, would bring in £122 million in additional VAT? Does that not make the net cost of abolition £628 million? If he is going to clobber the motorist by taking the money back, should it not be £628 million and not £750 million? I hope that he will answer that question.
Welcome though the measure is, the car industry needs a restoration of consumer confidence more than anything. That will not come about as long as people fear for their jobs, are fearful of outstanding debts and are uncertain as to the direction that the economy will take under the Government. As the likely effects of the autumn statement, as opposed to its promises, have sunk in, it is increasingly evident from industry, and the high streets, as well as from the House that, whatever else the autumn statement does, it will not lift the fear of unemployment that is so damaging the economy and people's lives.
As my hon. Friend the Member for Dunfermline, East (Mr. Brown) has said, even if the promised whole 1 per cent. of growth, as predicted in the autumn statement for next year, materialises, it will leave Britain in the three


years to 1993 with an appalling cumulative cut in real GDP of no less than 2·5 per cent., as compared with an increase of 4 per cent. in the United States, 10 per cent. in Japan, 5 per cent. in Germany, 6 per cent. in France, 8 per cent. in Spain and 4·5per cent. in the European Community as a whole.
That nails the claim made by some Conservative Members that somehow Britain is muddling along all right in a recession that is also hitting everyone else. The difference is that, in the past few years, other European economies have been growing, while ours has contracted. They have built up their industries and rate of production, while our Government have run our capacity down. As my hon. Friend the Member for Neath (Mr. Hain) has said, they have run it down to the point where even our ability to sustain our future standard of living is threatened.
How much confidence can we have in the Chancellor's forecast of 1 per cent. growth next year and his pathetic 0·25 per cent. forecast growth in total investment? After all, this is the Chancellor who told us in his interview during "On The Record" on Sunday:
The Government cannot forecast precisely whether the economy is going to grow by 1 or l¾ per cent. There are margins of error as I have constantly, constantly tried to make clear.
The Government have another chance today. Will they tell the House what are the margins of error for those pathetic forecasts of growth next year? Is the Chancellor saying that the downside of those margins of error is that there might be no growth at all? After all, he forecast growth of 2·25 per cent. this time last year, but, instead, we had a cut of 1 per cent. in GDP. As my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) said, that forecast is like an economic blind date—and it does not look like a very good one.
Although some of the decisions in the autumn statement may bring some limited benefit, they will he affected by the deflationary impact of others. It is all very well for the Government to boast that they now hope that the Jubilee line extension will go ahead—although they have been unable to confirm any deals that will enable that to happen—but what about transport in the rest of London? What possible sense does it make to cut £380,000 from London Transport's budget—equivalent to more than a quarter—when, as the right hon. Member for Brent, North (Sir R. Boyson) spelt out, the underground is crying out for more investment, not less?
What about the rest of Britain? Where is the capital investment that will give our country the communications network it needs and construction workers the jobs they need? Why have the Government not announced any new capital programmes? They have told us nothing new; they have simply cited programmes that have been announced previously.
I was pleased to note that the hon. Member for Newbury (Mrs. Chaplin) welcomed public-private financing partnerships. It is a pity that her opinion was not able to prevail in her previous job as head of the Prime Minister's political office, when Conservative Members heaped ridicule on the proposals of my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott). As my hon. Friend the Member for Kingswood (Dr. Berry) has said, measure after measure that we set out in our programmes before the election, and which was ridiculed by the Conservatives, is now being hesitantly implemented by the Government.
We do not complain that the Government have taken our policies. The more of our policies they adopt the happier we shall be, and the better off Britain will be. Our complaint is that they have not accepted entire programmes—their acceptance is half-hearted. What they propose in the autumn statement totally fails to match the challenge that now confronts our country as a result of the failure of their policies.
As my hon. Friend the Member for Darlington (Mr. Milburn) rightly said, the Government's industrial investment incentives are inadequate, and the cuts in training and industry budgets are particularly damaging, especially in regions with high unemployment.
As my hon. Friend the Member for Hartlepool (Mr. Mandelson) said, the Government are failing to meet the need for high quality training for the unemployed. Jobplan workshops can only be of limited value as long as six people chase every vacancy.
As my hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) asked, what good can come from cutting programmes which are desparately needed to regenerate inner city areas?
The hon. Member for Harrogate (Mr. Banks) rightly complained about cuts in the tourism budget, but he is too easily satisfied if he believes that the present budget for science, research and development is anywhere near adequate when many of our competitors are spending so much more and investing an increasing amount in important science, research and development for the success of industry in the future.
Several hon. Members referred to the Government's incomes policy. The obvious economic objection is that, even if it could work, it is bound to store up problems for the future. It takes demand out of the economy but will give rise to pressures in a couple of years time, precisely when inflation is likely to be taking off again. As my hon. Friends the Members for Newport, East and for Pendle (Mr. Prentice) pointed out with great passion, we also need to focus on the unfairness of that incomes policy.

Mr. Nigel Evans: Where would the hon. Gentleman get the money to pay for wage increases in the public sector? Would he get it from cutting back current spending on capital projects, on pensions or on social security?

Mr. Smith: I am pleased that the hon. Gentleman has asked that question, because it is a variant on a question asked by several Conservative Members, including the Chancellor, who asked what the Labour party would cut to bring down the public sector borrowing requirement. We shall bring down the public sector borrowing requirement by cutting unemployment.
On the unfairness of the Government's incomes policy, may I take the example of a real home help—a Mrs. Weston—whose take-home pay is just £100 a week. She receives that sum for the responsible job of looking after elderly people, many of whom are incontinent and confused. As well as doing their shopping, housework and 101 other things, she washes and dresses them and helps them to go to the toilet. The House will agree that it is not an easy job.
The Government are telling Mrs. Weston that she can expect, at most, an increase of £1·50 per week. That sum will be more than eaten up by the £3·75 which the Government acknowledge is likely to hit her through


inflation. Those of her colleagues with council rents to pay will find that 5 per cent. plus the increase in the inflation rate on which the Government insist will take another £2·32 or so. Clearly the Government are piling an indefensible burden on those workers least able to bear it. The British public will know that that is wrong, and will be deeply ashamed of what the Government are doing.
In addition to the injustice and unworkability of the Government's incomes policy, another deep and potentially devastating problem is hidden in what the Government have said so far about that policy. They must say whether it includes increments, performance-related pay, overtime and so forth. Are increments to be included in the 1·5 per cent.? I shall give way to the Chancellor if he will tell us. The Chancellor does not want to answer the question—perhaps he does not know. If they are not included, we have not a 1·5 per cent. pay limit, but a 1·5 per cent. limit plus 1·5 or 2·5 or 3 or 4 per cent.—and that is not what the Government have been claiming.
If increments are to be included, do the Government believe that there will be enough money within the 1·5 per cent. to honour legally binding contracts? The increments on nurses' wages scales are legally binding and automatic. Will the Government legislate to set aside those increments, as the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) did when he operated a statutory incomes policy? If not, the increments will have to be paid and, together with performance-related pay and other supplements, will rapidly use up the available funds. If that is the case, the Government are assuming either cuts in cash terms for other public service workers or large-scale cuts in staff. The House deserves to be told which.
As my hon. Friend the Member for Pendle reminded us with great passion, on Monday the Prime Minister appealed to the partnership and fairness of the British people. Where is the partnership and fairness in an incomes policy that gives a home help £1·50 a week and a judge £50 a week? Where is the partnership and fairness in removing wages council protection for 2·5 million low-paid workers? Where is the partnership in abolishing the National Economic Development Council—the very forum through which partnership in tackling Britain's economic problems could have been carried forward?
The reality is that, even as the Prime Minister talks partnership, he and his colleagues practise division. When the Chancellor talks of confidence, he breeds despair. How can anyone have confidence in the Chancellor after all that he has said and done? He is the Chancellor who sees little green shoots that are not there. He then protests, like a true believer in unidentified flying objects, "They were there—I saw them—yes, I did, But they have gone now." He then goes to the Treasury Select Committee and says, "Other people saw them too."
No wonder that the Chancellor's colleague, the hon. Member for Buckingham (Mr. Walden), wrote in yesterday's edition of The Daily Telegraph:
People will never quite believe what the Government tells them again.
We do not believe what the Government say in their gloss on the autumn statement. We have had not a budget for growth, but a statement for stagnation. On the Government's own admission, the statement will condemn thousands more of our fellow citizens to the despair of unemployment, bankruptcies and house repossessions.

The statement fails because it leaves people and resources idle, not mobilised as they should be to respond to unmet needs.
The Opposition have clearly stated what is needed for Britain's recovery. The ingredients are: real partnership in place of division; a jobs programme in place of unemployment; quality training in place of cheap labour schemes; public investment in place of spending cuts; homes in place of homelessness; a Europe-wide expansion programme in place of the wasted Tory presidency; a managed exchange rate in place of free market floating; and a positive energy policy in place of pit closures.
We need active government for sustained economic success, instead of the incompetent meandering of a Government who have broken their election promises, failed the economy and deceived the British people. The autumn statement once again confirms the Conservative party as the party of economic failure and mass unemployment. The Government should be rejected in the Lobby tomorrow, as surely as they are rejected by the British people.

The Paymaster General (Sir John Cope): I can agree with the first few words of the hon. Member for Oxford, East (Mr. Smith) in which he said that we have had an interesting and wide-ranging first day's debate. Thereafter, I differ from him. The hon. Gentleman recycled some of the speech that he made yesterday on the Ways and Means motion on car tax. He again asked me about the abolition of car tax. The answer is the one that I gave the hon. Gentleman last night and the one that my right hon. Friend the Chancellor gave to the House today. We certainly do not intend to anticipate the Budget at this stage. Still less do we intend to anticipate its effects based on the forecasts of the hon. Gentleman or anybody else.
Hon. Members have expressed concern about the continuing recession. My right hon. Friends the Prime Minister and the Chancellor recently emphasised that that concern is shared by the Government. As everybody knows, the economic background is difficult not only for us but for other countries. Our hopes for recovery in the early part of this year have been disappointed. The fact that economic activity in other countries remains weak and the outlook in Europe has worsened further in recent months makes this country's task more difficult, not easier. Our task is to return to sustainable growth without renewed inflationary pressures.
Experience in this country shows only too clearly that growth cannot be sustained unless inflation is controlled, and we all want sustainable recovery. Retail price inflation has fallen rapidly over the past two years from almost 11 per cent. in autumn 1990 to 3·6 per cent. in October this year, while underlying inflation is only marginally higher at 3·8 per cent. Both those percentages are below the European Community average, and producer price inflation and underlying earnings growth are both lower than they have been for a generation. This progress was achieved during a period when our anti-inflationary policies were bolstered by sterling's membership of the exchange rate mechanism. The turbulent events that culminated in the suspension of that membership have not diminished our determination to prevent any resurgence of inflationary pressures, and we have recognised the need for clear yardsticks by which we can judge monetary


conditions, and by which others can judge our monetary stance. As a result, my right hon. Friend the Chancellor has introduced a measure that Britain has never had before—an explicit target range for underlying inflation of 1 to 4 per cent. As the House knows, we intend to be in the lower part of that range by the end of the current Parliament. We have also established a monitoring range for M4 to go alongside our target range for M0.
As well as clearly laying out our objectives and the indicators on which we intend to concentrate, we have introduced considerably greater openness into the process by which interest rate decisions are taken.
The battle against inflation is never over and we must always be on our guard if we are to ensure that we can compete effectively with the best of our competitors in Europe and beyond. The good progress that we have made and the considerable downward pressures on inflation still in the pipeline have allowed my right hon. Friend to present to the House in his autumn statement a clear, comprehensive strategy for sustainable growth which has been widely welcomed.
We have responded with a considered reduction of interest rates and an imaginative package of measures designed to restore confidence and boost sectors of industry that have been particularly hard hit by the recession. We have done so without throwing away financial discipline because that would unleash a new burst of inflation and kill the recovery that everybody wants to see. We have made the package time limited so as not to impede the reduction in the PSBR that will occur as the economy recovers. We are well aware that persistent, high PSBRs would have the effect of passing a heavy burden of public sector debt to future generations. That is why it is also vital to continue to exercise tight control over public sector spending, as we have done in this round.
Some hon. Members expressed concern about the high level of the public sector borrowing requirement this year and the forecast for next year. No one in the Treasury is in the least complacent about the PSBR, but it will fall back as the economy recovers. As we all know, it compares badly with what we were able to achieve before, but our tough attitudes to public spending over the past decade mean that the United Kingdom now has the lowest Government debt in the European Community, except for Luxembourg, as a proportion of our GDP, and one that is lower than those of the other G7 countries. That will help us to sustain a high public sector borrowing requirement to get us through the recession. In any case, as has been pointed out, the planned growth of public expenditure is well within the potential growth rate of the economy. This ensures that the ratio of general Government expenditure to gross domestic product will fall and that will, in itself, help us to deal with the PSBR.

Mr. Hain: May I draw the Minister's attention to page 53 of the autumn statement, in which it is said that unemployment will be 2·8 million not only in the next financial year, but for the two subsequent financial years? That is an incredible figure and if it were breached, it would drive a coach and horses through the Government's public finances and put extra burdens on the PSBR. Can he name one independent authoritative forecaster who agrees that unemployment will remain at that total?

Sir John Cope: I am following the usual convention in saying that I am speaking about unemployment later, if the hon. Gentleman will forgive me for not replying to his point now.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) rightly congratulated the Chancellor on the fact that this will be the last traditional autumn statement. My right hon. Friend has instituted some profound and important reforms in the way that the Treasury organises its business and that the Government's financial decisions are made. The importance of these reforms has been under-estimated, and it is important that they are not. Merging the tax decisions of the Budget and the expenditure decisions of the autumn round into one joint process is not easy. Apart from anything else, the ancient seasonal organisation of Parliament is being totally reorganised, and we all know the difficulties involved in changing this place.
The second major change that the autumn statement embodies is the new method of settling expenditure from the top down instead of collecting departmental bids first. We can add to the reform list the new, more open methods of handling monetary policy, to which I have referred, the coming changes in the Government's accounts to distinguish between capital and revenue and the new changes in the rules for private finance of investment that is normally in the public sector. All these reforms have been introduced by my right hon. Friend and he deserves full credit for the biggest set of improvements to our financial decision-making process for many decades, if not for a century.

Mr. Barry Field: Did my hon. Friend see the parliamentary question that I tabled the other day? In it, I pointed out that only Ireland and ourselves still have a tax year that does not run with the calendar year. May I invite my hon. Friend to go a little further and bring that into line as well, because that is a much-needed reform?

Sir John Cope: We are open to suggestions, but not at the moment. We have noted my hon. Friend's point.
My hon. Friend the Member for Newbury (Mrs. Chaplin) referred to the changes in the rules for private finance, of which I have just spoken, and to the fact that most of the projects mentioned in this connection have to do with transport. She expressed the hope that they will go much wider. I assure my hon. Friend that they will. In some of the material that we have put out about this proposal, specific mention is made of the package of housing market measures and the lower housing association grant rates, of allowing British Rail to lease some £150 million worth of new rolling stock, provided that suitable leases are offered, and of ending the prohibition on borrowing by higher education institutions. That proposal also includes the national health service, so it goes much further than just transport.

Mr. Andrew Smith: The House deserves to know whether nurses' increments are included within the 1½ per cent. pay policy and how much money the Government are setting aside to pay for them.

Sir John Cope: Settlements are the basis of the pay policy. Existing performance pay will continue within the wages bill, but of course new performance pay arrangements and new arrangments of that kind will count against the 1½ per cent.

Mr. Andrew Smith: Will the right hon. Gentleman give way now?

Sir John Cope: No, I have very little time. I gave up some of my time to allow other right hon. and hon. Members to comment, but I want to respond to many of the points raised during the debate. It is quite clear that the 1½ per cent. applies to settlements.
My right hon. Friend the Member for Shropshire, North (Mr. Biffen) expressed elegantly, as always, philosophic doubts about public sector borrowing and other matters, to which we shall pay careful attention.
The right hon. Member for Berwick-upon-Tweed (Mr. Beith) expressed concern about local authority capital receipts. As he knows, the capital receipts rules were introduced in 1990 as part of the new local authority capital finance scheme, with the objective of bringing capital spending under control. Local authorities were required to set aside a proportion of their capital receipts to repay their debts.
Some local authorities did so, and it would be wrong and unfair on local authorities that took the prudent course of repaying debts from their set-aside receipts to allow others that accumulated receipts to use them. That is why the new arrangements apply to future receipts, so that people know in advance what is going to happen to them.
My right hon. Friend the Member for Woking (Mr. Onslow) advanced his own plan for the pay of Members of Parliament. It was ingenious, but built more on the measures in the autumn statement than was intended. In any case, that matter is for the House.

Mr. Andrew Smith: Will the right hon. Gentleman give way now?

Sir John Cope: No. I made it clear that I will not give way because I have little time left.
My right hon. Friend the Member for Woking raised also the question of interest charged by banks, as did other right hon. and hon. Members. The Government take very seriously complaints that banks are not passing on base rate cuts, particularly to small firms. It is not for the Government to intervene in individual negotiations, but my right hon. Friend the Chancellor is taking the matter up again with the clearing banks and plans to meet their chairmen in the near future. He has also asked the Bank of England to review the latest position as quickly as possible. When a review was undertaken last year, it was shown that small firms had benefited from base rate cuts—but clearly it is time to check the position again.
The hon. Member for Newport, East (Mr. Hughes) referred to road building and the Severn bridge. The second Severn crossing, which is being built between the hon. Gentleman's constituency and mine, is an example of private finance being used in a particularly imaginative way to assist the road building programme. The hon. Gentleman welcomed the ending of car tax, on which the hon. Member for Dunfermline, East (Mr. Brown) poured scorn earlier. In this instance, the hon. Member for Newport, East is in the majority, both in the House and elsewhere, in welcoming that development.
My hon. Friend the Member for Bristol, North-West (Mr. Stern) drew attention to some supply-side measures involving the property market, and we shall certainly ponder those. The hon. Member for Londonderry, East (Mr. Ross) raised a series of issues, some of which I have

already touched on; one however, was the cost of security. I have personal reason to remember what terrorism costs, in terms not only of cash but of confidence—as well as the tremendous personal cost paid by people in Northern Ireland. I shall draw the attention of my right hon. and learned Friend the Secretary of State for Northern Ireland to the two road projects in the hon. Gentleman's constituency.
A number of hon. Members—including the hon. Member for Hartlepool (Mr. Mandelson)—mentioned unemployment. I think that the hon. Member for Hartlepool misread the position slightly, but I have discovered that he is usually fairly accurate, and it may turn out when I read Hansard that I did not hear him correctly. The point is, however, that despite the increase in unemployment over recent quarters—which we all regret—long-term unemployment is still about one third lower than its peak six years ago. The object of sustained growth is to bring down unemployment; as has been pointed out by a number of hon. Members—including the hon. Member for Sheffield, Hillsborough (Mrs. Jackson), it will not be quick or easy, but there is no quick or easy way to do it.
My hon. Friend the Member for East Lindsey (Sir P. Tapsell) made some important points about Japanese investment, which has been very valuable.

Mr. Hain: Will the Paymaster General give way?

Sir John Cope: I would rather not. I am within about four minutes of the end of my speech.
I was about to say that Japanese investment has been extremely valuable in providing jobs, and in other ways.
The hon. Member for Great Grimsby (Mr. Mitchell) was, as usual, well out of line with his party. That is no surprise, of course. Far from thinking devaluation a bad thing, as some people appear to, the hon. Gentleman appeared to consider 16 per cent. devaluation no more than marginal, and to believe that a much more substantial devaluation was required. Everyone is entitled to his opinion, but if massive devaluation were the sole answer to the United Kingdom's problems, a glance at the exchange rates over the past 30 to 40 years would lead us to suppose that the economy was very strong. I am not prepared to accept the hon. Gentleman's recipe for sustained recovery, or any sort of recovery, and I doubt whether any Opposition Members accept it either.
The hon. Gentleman presented an ingenious method of spending money without having to raise it. I confess that I did not quite follow it, but it seemed to amount to printing money and bringing about inflation. It was all very interesting, but not very relevant to what the rest of us want.
The hon. Member for Hillsborough spoke of urban programmes. She said, correctly, that £176 million would be available in 1993–94. She many not have noticed the extra spending on city challenge, which is being introduced as part of the package. Including that money, a total of £408 million will be available for urban-priority authorities, compared with £319 million this year. That is not counting the additional spending power from capital receipts—more than £500 million—that will result from the relaxations announced last week. Moreover, the resources for the urban programme in 1993–94 allow £20 million for new projects, over and above existing


commitments. That money would be allocated through capital partnership to work alongside the capital receipts money that I have mentioned.
All in all, the debate has been interesting but the Labour party, having spent the summer arguing about whether its economic policy or its presentational skills had lost it the election, has not altered its economic policy since, so far as I can see, although the hon. Member for Dunfermline, East shouts about it louder than we are used to, which is a particular punishment for those of us who sit on the Government Front Bench.
Opposition Members seem to have a new dilemma. In facing the autumn statement, they cannot decide whether to attack our policies or to claim the credit for them. The result is that they do both. It has been impossible to tell—

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

Oil Exploration (Compensation to Fishermen)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]

10 pm

Mr. Barry Field: I thank you, Madam Deputy Speaker and, through you, Madam Speaker for granting me the Adjournment debate. I was asked by the fishermen of the Isle of Wight to inquire discreetly whether Madam Speaker enjoys lobster or crab from time to time, because they wish to make a donation to her for granting me the debate. No doubt I can make discreet inquiries to that end via Hansard.
I apologise to the Minister for Energy for bringing him to the Dispatch Box on the issue, because he has been extremely helpful. There was a stage when I thought that the whole matter was settled.
To recap, on 4 June in the House of Commons I met Mr. Romieu, the chairman and managing director of Elf Enterprise. I told him how concerned I was that there was not a proper compensation scheme in place for the inshore fishermen who were affected by the oil exploration that was taking place off the Isle of Wight. He wrote to me on 10 June and accepted that there was a need for an ex gratia payment. On page 2 of his letter he said:
With the list complete, we will also agree with the fishermen concerned, not all of whom belong to associations"—
I underline that point—
a fair and equitable system of ex gratia payment from Elf Enterprise to secure their co-operation.
In the final paragraph he said:
It is deeply disappointing to me that you have been angered as a result of the representations made to you by fishermen in your constituency concerning our activity. As a responsible company, it is clearly our intention to deal with their concerns, and in so doing achieve the same level of co-operation established during the 98/13 exploration programme.
That exploration was carried out by Occidental Oil which was taken over by Elf Enterprise.
On 22 June I wrote to my hon. Friend in the Department of Trade and Industry and told him that we were becoming increasingly disillusioned with Elf as it had not set out the terms of its compensation scheme. I enclosed with my letter a copy of the latest letter that I had received from the fishermen's association. I told my hon. Friend that we felt that Elf was being deliberately obstructive, particularly as the same individuals were involved in the Elf compensation scheme for fishermen as had been concerned with the Occidental scheme, because they were taken over when Elf took over Occidental. That was of great concern because effectively they had been through the exercise once before with island fishermen.
However, everything looked much brighter after a while—thanks, I am sure, to my hon. Friend's intervention. On 10 July, therefore, I was able to write the following letter to him:
Dear Tim, You have won first prize in the 'most helpful' Minister competition for this session and the fishermen and the Member for the Isle of Wight are pleased to acknowledge this by awarding you one week's holiday at the Field hovel during the coming recess … Thank you and a thousand crustacea owe their lives to you!
Unfortunately, my enthusiasm was a little premature. I could not possibly read into the record the Minister's


reply. He is already under a great deal of pressure from the energy world, and I feel certain that the population lobby would be immediately on his back, were they to see the contents of his reply.
As for the contents of the correspondence with one of my fishermen, I can assure my hon. Friend that I have prepared for him copies of all the correspondence with just one fisherman who now finds himself without full compensation. I hope that my hon. Friend will accept that, having carefully scrutinised all the documents the fishermen brought to me, I found that they were all the same.
This particular fisherman received a letter on 6 July from Elf Enterprise. It was a "Dear Sir" letter and it set out the way in which the compensation scheme would operate. It worked like this. There was to be a £4,000 lump sum payment on an ex gratia basis to bona fide fishermen or chartered skippers who regularly worked in the area and who were certified to do so by the local fishermen's association. There was to be £2,000 up front straight away on signing the agreement and £2,000 at the end of the survey, providing there had been no further disruption—the point being that both I and certain others had encouraged the fishermen in their blockade of the seismic survey because we had been unable to obtain a proper compensation scheme from Elf. Therefore, Elf said that it would make half the payment available as a sign of its good will straight away, as soon as all the fishermen had signed up, and that it would pay the balance at the end, provided that there was no more disruption to the work during the rest of the survey—which proved to be the case.
Elf produced the agreement on the same day, 6 July. There are a number of points in the agreement, but the real point concerns item 5 which says:
The Company may be requested by the Inland Revenue to supply details of any such cooperation payment. Such details will only be supplied on request.
Item 6 says:
Payment will be made on the basis of information disclosed to the Company by the Skipper or Owner or his representative organisation and set forth below.
The information required relates to details of the skipper-owner, the address, the name of the vessel, the type of fishing, full or part-time, the average days fished in the survey area per month and the association to which he belongs.
The agreement contains a number of other points, including the fact that it is governed by English law. Nowhere in the agreement, however, which is absolutely standard and which was used for all the fishermen, is there any suggestion that the fisherman has to provide certified accounts, and the like, in order to obtain these payments—one of the points in contention.
My hon. Friend will have noted carefully the point that I made at the beginning: that the managing director of Elf was certain that a compensation scheme would be provided that would be available not just to members of the fishermen's association but to other fishermen. However, a number of fishermen have had no compensation. An attempt is being made by the oil company to suggest that those fishermen have not been certified, so to speak, by the fishermen's association.
I have a letter of 30 September from the Isle of Wight Commercial Fisherman's Association which says:

I have been requested to contact you to confirm that the people named below are members of the above association. They attended a meeting with representatives from the Elf Enterprise Company when they were told that ALL persons whose name appeared on the list that was prepared that evening would receive co-operation payments.
The persons named below have been greatly inconvenienced by the survey resulting in a significant decrease in their earnings.
When I first asked for the Adjournment debate this evening, I thought that I might produce a list of all the people who have been affected, or who have either not been paid or not been fully paid. I then realised that that was a treacherous course to follow because the list might not be exhaustive. I do not intend to go down that path this evening. However, I know the principal players in the problem.
We must bear it in mind that a number of fishermen have received no compensation despite the fact that they signed the agreement, the fact that they are members of the association and the fact that they went along to meetings. Their request for compensation has been refused point blank.
Joy of joys, those fishermen then received a letter from Elf Enterprise thanking them for their great co-operation during the survey and for all the assistance they had given. I wrote a rather strong letter to Elf Enterprise and received a letter back from Mr. Jackson, the marine operations manager, who is one of the serious problems in this matter. He replied to me on 14 October as follows:
The purpose of our letters dated the 1, 5 and 12 of October, sent out to all 207 individuals on our contact list was to keep people informed of the progress of the survey, which has been repeatedly delayed by inclement weather. Any misunderstanding that might have arisen as a result of receipt of these letters by fishermen who have not been made an offer of payment is regretted.
One does not have to be a genius or to know much about inshore fishermen or fishermen the world over to know that having refused them compensation payments and then to write to thank them for their co-operation is to invite a fairly robust retort. The fishermen were pretty irritated, to say the least, and so was I. By then, I had come to expect a rather lackadaisical attitude from Elf.
There were then letters dated 14 October. I do not know whether they were all sent on the same date, but they were all of the same nature. The company, under the heading
Block 98/12 Seismic Survey—Co-Operation Payments",
pointed out where the meeting was to take place, the venue, the time and all the information that the fishermen had to produce to get paid. The company asked about the local authority licence for the carriage of passengers—charter only—the record of charter bookings, vessel logbooks and diaries. I draw my hon. Friend's attention to the fact that none of that information was required in the original agreement.
By then, the Isle of Wight Commercial Fisherman's Association was pretty angry with Elf. It sent me a copy of its letter to Elf which was dated 24 October. The association quite rightly makes the point as follows:
The agreement that you made with the fishermen was for non-interruption of the survey and as you already know, our members have given you their fullest support in this. We would expect you to honour your side of the agreement as expediently as possible and not put further matters of contention in the way of this final settlement.
By then, the list had become extensive and there was great concern among the fishermen—I also felt great concern


—that the company was asking for more and more information which was not contained in the original agreement.
The piece de resistance was served on 30 October, with the same heading. The simple, one-paragraph letter, said:
I refer to our meeting … and confirm that we will be unable to pay the second instalment of Cooperation Payment due under the terms of our Agreement dated 6 July until you provide certified accounts and fish sales notes, as requested in my letter … to substantiate the information originally provided by you and which forms part of the Agreement between us.
None of that information was mentioned in the original agreement.
On 21 October, I wrote to Mr. Jackson in Aberdeen and I said that I did not think that the correspondence would bear public scrutiny. I thought that it was rather perverse to say the least that letters had been sent to fishermen who had not been offered payment. That showed abominable administration and something that I had come to expect from Elf after my dealings with the company. I felt that if I could not get a more positive answer from him or from the managing director Mr. Romieu I would have no alternative but to raise the matter in Parliament.
I did not want to trouble my hon. Friend the Minister yet again because he had been very helpful. An hon. Member should not have to come to Parliament to try to negotiate on behalf of his constituents if an oil company is a reputable organisation. Clearly the company is involved in serious matters in respect of North sea safety and one hopes that one deals with reputable people when one deals with big public companies.
I eventually received a reply from the managing director dated 12 November and I want to quote two paragraphs from that letter. I apologise to the House for quoting at such length from documents, but they are clearly germane to the problem. The managing director wrote:
It should not be forgotten that we had as much right to carry out our survey as they had to fish, and there was no obligation on us to make any payments at all.
I draw the attention of my hon. Friend the Minister to that point because I think that he and I might disagree with the managing director of Elf about that—at least, I hope so. The managing director continued:
Nevertheless, we recognised that some disruption would be inevitable and we therefore proposed a scheme to make co-operation payments to bona fide mobile gear fishermen nominated by their associations.
In almost the last paragraph he wrote:
Having said all of the above, I accept that, during the course of such a large and complex scheme it is entirely possible that some individual cases have not been dealt with as fairly as we should have wished. If this is so I can only express my regret, and assure you that we have made every effort to deal in good faith with all the claims which we have received.
I enjoy watching free enterprise flourish in our nation and there is no reason why we should have come to this dreadful impasse. I do not believe that Elf has made a serious endeavour to accommodate the fishermen.
The managing director says in his letter, quite rightly, that the company has paid out nearly £ 1 million in compensation to fishermen. I doubt whether, absolutely top whack tonight, we are talking about more than £30,000. The figure has been very exaggerated.
I understand that the company's parting shot to my constituents was that it intended to come back. It hoped to win licences for further exploration and perhaps my hon.

Friend the Minister has some information about that. It is extraordinary that the company did not want to leave the sweet smell of a nice bunch of violets behind instead of the great problems and difficulty which are ongoing and have caused upset and real aggravation to me and to my constituents.
The gnomes of Zurich were rather troublesome to the Government in the past. However, Elf Aquitaine is clearly the mafia cousin of the gnomes of Zurich in respect of the inshore fishing industry off the Isle of Wight. I believe that the company has turned out to be a piker because it has not honoured its agreement in the way that the managing director assured me that it would when representatives met me in the House on 4 June.
As I represent the numerically largest constituency in the House, I must be very careful how I ration my applications for Adjournment debates. There are many pressing issues facing the Isle of Wight. Endeavouring to wring out the last few coppers of a compensation scheme from a large multinational oil company is not in my view a justified use of my time or that of my ministerial colleague tonight. I am very sad that this debate has been necessary.

The Minister for Energy (Mr. Tim Eggar): I am grateful to my hon. Friend the Member for Isle of Wight (Mr. Field) for not reading out my reply to his kind invitation to join him in what he termed his hovel. I am not sure whether the size of my family would have borne the scrutiny that the House would apply. I must thank my hon. Friend for his very kind personal remarks about my small role in this affair and in turn pay tribute to him for the way in which he has fought on behalf of the fishermen and his constituents.
This is an interesting matter and, before this debate, it had not received much attention or time in the House. It might be useful if I briefly explain exactly how the licensing system works with regard to fishermen's interests.
The standard conditions which are incorporated in seaward petroleum licences are published before the blocks are offered for licensing. Those standard conditions do not include any requirement for the licensees to make payments, either as compensation or otherwise, to commercial fishermen, or indeed to any other marine interests.
As a matter of policy, the Department does not regard it as appropriate to place requirements on petroleum licensees to pay compensation to fishermen for loss of access to fishing grounds. Oil and gas licensees are no less entitled than fishermen to pursue their activities on the open seas. If the licensees and fishing organisations agree in certain circumstances that some form of payment would be helpful, that is essentially a commercial matter for them.
However, fishing interests are taken account of in the planning of licensing rounds and when licences are awarded. The licences include a standard clause to the effect that the licensee shall not carry out operations in such manner as to interfere unjustifiably with fishing or with the conservation of the living resources of the sea. To help to give substance to that provision, my Department consults the fishing departments and the principal fishing organisations to identify fishing sensitivities before


deciding which blocks are to be offered for licensing. It also consults other organisations about other sensitivities, for example, environmental matters.
Where the fisheries departments advise that special conditions should be attached to licences, tailor made to the particular sensitivities in certain blocks, that advice is followed. For instance, where blocks lie in herring spawning grounds, for example off the east coast, the licensees are required to carry out seabed surveys within a prescribed distance of any proposed drilling location to ensure that drilling will not disturb the spawning grounds. In the spawning season in such areas, conditions are imposed as to the time of year in which they can undertake seismic work or drill, and the use of certain drilling muds may be required in the case of drilling.
Licence-specific conditions, where applied, touch on compensation in one limited respect. If oil-related debris is located on the routes taken by supply vessels to and from rigs, and it results in damage to fishing gear, the licensees are required to deal promptly with claims in respect of that damage.
A further indication of the recognition in the licensing arrangements of fishing interests is that we require licensees to nominate a fishing liaison officer to maintain contact with those interests.
So care is taken to ensure that fishing interests are properly taken into account in our licensing arrangements. What we seek to achieve by our consultations and by provisions tailor made to particular blocks is a situation where there is mutual accommodation between those two groups of sea users.
Perhaps my hon. Friend would like to reflect whether his fishing constituents would really wish for formal compensation arrangements. I understand that that is not the position or an aim of the National Federation of Fishermen's Organisations. The federation has been developing an understanding with the United Kingdom Offshore Operators Association on the subject of compensation.
I have received from the National Federation of Fishermen's Organisations a fax, which states that the organisation
has its reservations with regard to the adjournment debate since it has established a clear working relationship with UKOOA on the subject of compensation which takes account of lost earnings in the given area and the likely effects of restrictions to access. The NFFO is, therefore, prepared to liaise directly with the Isle of Wight Commercial Fisherman's Association in order to attempt to reconcile the various difficulties.

Mr. Field: The NFFO telephoned me this week and said that it had attempted to negotiate on behalf of my fishermen. I pointed out that it had been nowhere near the scene. The matter had been in all the national papers and every television channel in the south, yet we did not hear a dicky bird from the association. Indeed, we did not hear from it in the initial stages when we had exactly the same problem with Occidental. The NFFO's association with UKOOA is laughable. The fishermen with whom it said that it had been in contact were not affected by the most recent licence.

Mr. Eggar: My point was simply that over the years the NFFO has had experience of similar disruption caused by seismic surveys. It has developed a relationship with the oil

companies. Not invariably, but in general, that relationship has worked reasonably well and has proved satisfactory to both parties.

Mr. Elliot Morley: Will the Minister give way?

Mr. Eggar: I will give way, but I have many matters to cover in a short time.

Mr. Morley: The Minister has been fair. The NFFO and, in the first instance, the local association negotiates. The federation offers its services to bring the matter to a conclusion. So the hon. Member for Isle of Wight (Mr. Field) was a little unfair.

Mr. Field: I must object. This is my Adjournment debate and the hon. Gentleman did not ask my permission to intervene. The organisation to which he refers and seeks to defend—

Madam Deputy Speaker (Dame Janet Fookes): Order. The person who has the Floor decides whether to allow an intervention.

Mr. Eggar: I apologise to my hon. Friend for giving way to the hon. Member for Glanford and Scunthorpe (Mr. Morley). It is a difficult matter and I do not want to upset anyone. None the less, there is a national organisation and it has evolved a system. It could have a role in the final resolution of the matter to which my hon. Friend refers. I do not seek to impose that, or anything else. I hear what my hon. Friend has to say about the role that the national organisation has played.
The petroleum licence given to the company includes not only a right but an obligation to undertake seismic surveys. Surveys are necessary under the terms of the licence. The company must undertake a seismic survey in order properly to appreciate the potential of the block. In this case, the company chose to pursue a 3-D seismic survey, which takes rather a long time but is believed by the industry to give a fairer and more accurate picture of the potential of that block. That perhaps accounts for the fact that the time taken has been rather longer in this instance than might otherwise have been the case.
I emphasise to my hon. Friend that, although I have been in contact with the company about the matter, it is the company's responsibility to decide how to respond to the application and the representations made by my hon. Friend and the fishing organisation. I am told that the company had more than 30 meetings with fishermen's organisations. I am aware that my hon. Friend took the view that the consultation was not sufficiently wide.
My hon. Friend may be aware that Elf Enterprise has undertaken, in addition to reaching agreement in principle with the organisations on compensation, to fund research into the migratory patterns of sea bass in the area. That might be of some help to the local fishermen. I understand that payments made by the company to the fishermen have totalled more than £1 million. That is not an inconsiderable sum. I am told that the company has spent a total of about £3 million on the entire seismic operation. So the payments to fishermen represent 30-odd per cent. of the total cost of the seismic operation.
The company has no obligation under the terms of the licence or in law to pay any compensation. Like my hon. Friend, I take the view that, where there is proven disruption, it is appropriate for the company to


compensate. However, it is not unreasonable for the company to seek to satisfy itself that the money that it pays over is justified in terms of the fishermen's activities. I do not say that to defend the company, but because it can offset some 80 per cent. of the cost of compensation against tax payable to Her Majesty's Government. So we all have an interest as taxpayers in ensuring that the company pays a fair sum.
I listened carefully to my hon. Friend and I shall ensure that the Hansard report of the debate is passed on to the company. I hope that some satisfactory conclusions will be reached by all parties.

The motion having been made at Ten o'clock and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.